Betting on India’s insurance growth potential, South African financial services giant Sanlam, on Friday, once again raised its holding in two of its Indian insurance joint ventures (JVs) with South India-based Shriram Group in a deal worth around ₹2,230.78 crore.
Sanlam Emerging Markets Mauritius Ltd said in a statement that it will increase holding in Shriram General Insurance Co. Ltd by 10.74% and in Shriram Life Insurance Co. Ltd by 12.02%.
“This transaction will enable Sanlam to further enhance its position in this important market and drive growth,” said the Sanlam statement.
The deal involves two parts.
In the first part, Sanlam said it will acquire an effective 6.29% in Shriram General and 7.04% in Shriram Life from existing investor TPG India Investments II Inc, which is a major US-based private equity player.
The second part entails acquisition of an effective 4.45% in the general insurance firm and 4.98% stake in Shriram Life from the Shriram Ownership Trust.
The deal, Sanlam said, will be funded partly by cash and partly from the proceeds of another transaction within the Shriram Group.
Sanlam Life will dispose of a part of its direct holding in Shriram Finance Ltd (SFL), which took place on 28 March, according to the statement.
On 28 March, Sanlam Life sold 1.59% (of its 2.01% direct holding) in SFL to Shriram Value Services (SVS) at the listed market value of ₹2,386 per share, which resulted in gross proceeds of 3.3 billion South African rands ( ₹1,427 crore). SVS is a subsidiary of Shriram Capital Pvt. Ltd (SCPL) and Sanlam currently owns 40.7% in SCPL while the balance is controlled by Shriram Ownership Trust and its affiliated entities. Sanlam currently owns an effective 26% stake in SVS.
On Friday, Sanlam said about 60% of the funding for the latest deal to hike stakes in the two insurance JVs will be coming from the proceeds of this transaction, while the balance 40%, which is about ₹892.31 crore will be funded by other available capital resources.
Sanlam’s stake in both the insurance JVs will cross the crucial 50% mark after Friday’s deal.
Sanlam said its economic shareholding in Shriram General will increase to 50.99% from the current 40.25% and the effective stake in Shriram Life will go up to 54.40% from the current 42.38%.
During the first 11 months of fiscal 2024, Shriram Life earned a first-year premium of ₹1,558.41 crore, which is about 65.4% higher as compared to the same period of the previous fiscal, according to the Insurance Regulatory and Development Authority of India (Irdai).
Shriram General, on the other hand, underwrote a gross direct premium of ₹2,715.57 crore between April and February of fiscal 2024, which is 35.35% more than the same period of the previous fiscal.
“Sanlam board recognises India as a core market and strategic pillar to achieving long term earnings growth and sustainable shareholder value creation for Sanlam,” said the Sanlam statement.
This deal, according to Sanlam, strengthens the company’s position in India, a market that is core to its strategy.
Sanlam said, “This capital redeployment also increases Sanlam’s exposure towards core insurance entities and decreases exposure to the credit business in line with its stated strategy.”
Since 2005, Sanlam and Shriram Group have been partners in the insurance space, starting with a 26:74 JV structure.
In 2016, after the government raised FDI limit in the insurance sector, Sanlam first increased its holding in the two JVs to 49% by acquiring additional 23% each in Shriram Life and Shriram General.
Sanlam, on Friday, said following the 28 March transaction its effective economic shareholding in SFL will come down to 9.54% from 10.19%.
