Munich Re’s India Partner Weighs Selling Health Insurer Stake: Sources

By Ganesh Nagarajan | February 13, 2019

Prathap C. Reddy and his family, founders of India’s Apollo Hospitals Enterprise Ltd., plan to sell their holdings in an insurance venture with Munich Re AG to repay debt, people with knowledge of the matter said.

The family is seeking to sell its entire holding of 41 percent in Apollo Munich Health Insurance Co., for about 12 billion rupees ($170 million) in six months, the people said asking not to be identified as the discussions are private. The proceeds will be used to repay part of the debt raised by pledging Apollo Hospital’s equity as collateral, the people said.

Investors have been concerned about leveraged companies including Subhash Chandra’s Essel Group and Anil Ambani-controlled firms that have borrowed by offering shares as collateral leaving them vulnerable to margin calls as stocks plummet. Shares of Apollo, India’s biggest hospital chain operator, which has about 34.3 billion rupees of debt, plunged the most in seven years on Monday after the founders pledged more shares to raise funds to repay debt.

“We are aware of the recent increase in our pledge levels,” Apollo’s Managing Director Suneeta Reddy said in a text message when asked about the asset sale plan. “We have clear plans to reduce the same by at least 50 percent over the next six months.” She didn’t comment about the plan to sell stake in the insurance venture.

More than three-fourth of about 34 percent stake that the Reddy family holds in the hospital operator is kept as collateral for loans, the people said. Four companies including two private equity funds have shown interest in acquiring the family’s holdings in the venture with the world’s largest reinsurer, one of the people said, declining to disclose further details.

Munich Re is also planning to sell it’s stake in the venture, the Economic Times reported in November. The German company is in talks with HDFC Ergo General Insurance Co., according to the report.

Lenders dumped shares of Anil Ambani companies after the value of the collateral plummeted following a selloff that wiped 126 billion rupees off the group’s market value this month. Media tycoon Chandra’s Essel Group signed a pact with its lenders that protects the group’s borrowings against shares from being counted as default until Sept. 30, even if their value erode.

Apollo Munich Health’s gross written premiums, or the revenue from insurance contracts, jumped by a third to 17.2 billion rupees in the year ended March 2018. Apollo Hospitals’ owns about 10 percent of the venture.

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