HDFC Bank will acquire a 4.99 per cent stake in group firm HDFC Ergo General Insurance Company Ltd from promoter HDFC for Rs 1,906.43 crore. The country’s largest private sector bank will purchase 3,55,67,724 shares at Rs 536 apiece.

In a regulatory filing with the stock exchanges on Saturday, HDFC Bank said it has been a distribution partner of HDFC ERGO since 2009.

The proposed transaction enables the bank to “participate in the growth opportunity of HDFC Ergo and augment the general insurer’s growth prospects, leading to long-term value creation for its shareholders’’, HDFC Bank said.

The transaction will require approval from the Insurance Regulatory and Development Authority of India (Irdai). The bank will seek an approval from the Reserve Bank of India.

While the transaction is expected to be completed by September 30, HDFC Bank said that any other necessary regulatory or governmental approvals will be evaluated prior to the share purchase agreement for the transaction and will be applied for as required.

HDFC Ergo is a joint venture between HDFC Ltd and Ergo Group AG, the primary insurance entity of Munich Re Group of Germany. It had a market share of 6.2 per cent in 2020-21 in terms of gross direct premium income, and offers products such as motor, health, travel, home and personal accident cover. For the year ended March 2021, it posted a turnover (measured in gross written premium) of Rs 12,443.93 crore.

The announcement of this transaction comes just days after HDFC sold a 0.62 per cent stake in the general insurance subsidiary to the foreign JV partner Ergo International for over Rs 236 crore to comply with regulatory norms.

The corporation had said that it had to reduce its shareholding in HDFC Ergo to 50 per cent or below under an RBI directive. Before the stake sale, HDFC held 51 per cent in the general insurer.