South African financial services group Sanlam is increasing its stake in its Indian insurance joint ventures with the Shriram Group, underscoring its bullish outlook on India's insurance market. The deal, valued at approximately ₹2,230.78 crore, will give Sanlam majority ownership in both Shriram General Insurance and Shriram Life Insurance.
In a move highlighting the attractiveness of the Indian insurance sector, Sanlam Emerging Markets Mauritius Ltd. has announced a substantial investment to increase its holdings in Shriram General Insurance Co. Ltd. by 10.74% and Shriram Life Insurance Co. Ltd. by 12.02%. This transaction, estimated at ₹2,230.78 crore, will solidify Sanlam's position in the Indian market and is expected to fuel future growth. Sanlam's statement emphasized that the company sees this transaction as an opportunity to 'further enhance its position in this important market and drive growth.'
The deal is structured in two parts. First, Sanlam will acquire stakes from TPG India Investments II Inc., a prominent US-based private equity firm, securing an effective 6.29% in Shriram General and 7.04% in Shriram Life. Second, it will acquire an effective 4.45% in Shriram General Insurance and a 4.98% stake in Shriram Life from the Shriram Ownership Trust.
The funding for this acquisition will come from a combination of cash reserves and proceeds from a recent transaction within the Shriram Group. Sanlam Life recently divested a portion of its direct holding in Shriram Finance Ltd (SFL) on March 28, selling 1.59% of its 2.01% stake to Shriram Value Services (SVS) for ₹2,386 per share. This sale generated ₹1,427 crore for Sanlam. Notably, SVS is a subsidiary of Shriram Capital Pvt. Ltd (SCPL), in which Sanlam holds a 40.7% stake.
Following this latest transaction, Sanlam's economic shareholding will exceed 50% in both insurance JVs. Its stake in Shriram General Insurance will rise to 50.99% from 40.25%, and its effective stake in Shriram Life will climb to 54.40% from 42.38%.
The performance of Shriram's insurance businesses has been strong. In the first 11 months of fiscal year 2024, Shriram Life reported a first-year premium of ₹1,558.41 crore, a substantial 65.4% increase compared to the same period in the previous fiscal year, according to data from the Insurance Regulatory and Development Authority of India (Irdai). Shriram General Insurance underwrote a gross direct premium of ₹2,715.57 crore between April and February of fiscal 2024, reflecting a 35.35% increase over the previous year.
Sanlam underscored the strategic importance of India to its long-term growth strategy: 'Sanlam board recognizes India as a core market and strategic pillar to achieving long term earnings growth and sustainable shareholder value creation for Sanlam.' The company believes that this capital redeployment will increase its exposure to core insurance entities and reduce exposure to the credit business, aligning with its stated strategy.
Sanlam and Shriram Group have maintained a partnership in the insurance sector since 2005, initially starting with a 26:74 JV structure. After the government increased FDI limits in the insurance sector in 2016, Sanlam increased its holding in the two JVs to 49% by acquiring an additional 23% each in Shriram Life and Shriram General.
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