Shriram Capital Weighs Sanlam’s Interest in Insurance Business

CHENNAI: Financial services firm Shriram Capital Ltd (SCL) on Tuesday said its South African partner Sanlam’s decision to invest directly in the former’s insurance business will be finalised by April.

Currently, Sanlam holds 26 per cent stake in the Rs 70,000-crore SCL, the holding company of Shriram Life Insurance and Shriram General insurance and other financial services businesses.

With the government easing foreign direct investment norms in insurance last year, Sanlam is allowed to invest 23 per cent directly or indirectly in SCL’s insurance verticals, taking its total investment to 49 per cent in SCL.

“Sanlam is keen to come into the insurance companies directly. They currently have 26 per cent in SCL and have expressed their interest…we need to go through the approval process (from FIPB) and we hope this will be completed by March-April,” G S Sundararajan, Whole Time Director, SCL told Express.

He, however, didn’t disclose the valuation the company was expecting for Sanlam’s proposed 23 per cent stake buy. “That’s something, which we need to finalize. This (Sanlam picking up 23 per cent stake) is being discussed and not finalised yet,” he said.

Currently, Shriram Life Insurance is growing at about 25 per cent year-on-year and is expected to continue the momentum. Likewise, the non-life insurance firm growing at over 15-16 per cent, has significant presence in motor insurance and will diversify into non-motor insurance. “Currently, non-motor contributes about 5-6 per cent to our overall insurance business. Over the next five years, we intend to increase this to about 30 per cent,” Sundararajan said.

Insurance FDI Pie

■ 52 insurers including 24 life and 28 non-life players

■ Netherlands-based Ageon upped stake in Ageon Life Insurance to 49%

■ Japan’s Nippon too rose stake to 49% in Reliance Life

■ France-based AXA increased its stake in both life and non-life business in JV with Bharti

■ Britain’s Bupa rose stake to 49% in Max Bupa

The insurance vertical (both life and non-life) contributes about 20 per cent to SCL’s overall business and this is also set to grow. “The proposed funds (foreign investment from Sanlam) will be used as growth capital to expand our branch network and help improve our non-motor insurance presence,” he said.

As for going public, SCL would wait another 2-3 years before taking a call. “We are sufficiently funded and that’s not something we are looking at,” said Manoj Kumar Jain, MD, Shriram Life Insurance, which is currently ranked sixth in India in terms of number of policies. However, in terms of premium, it is ranked 13th.

“This is due to our product mix involving low premium to further financial inclusion. Though the number of policies are high our premium component is less. For instance, if the industry average premium is Rs 38,000, our average is Rs 13,000,” Jain said.

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