Sanlam has already entered into a share purchase deal to buy 6.29 per cent in Shriram General Insurance Company (SGIC) and 7.04 per cent in Shriram Life Insurance Company (SLIC) from TPG India Investments, and 4.45 per cent in SGIC and 4.98 per cent in SLIC from the Shriram Ownership Trust(SOT)
In all, the company would pay about Rs 2,327 crore for raising its stake in these insurance firms
Chennai:
Recognisng India as a core market and strategic pillar for achieving its long term growth , South African financial services multinational Sanlam, the long time joint venture partner of Shriram Group in many of its Indian entities, has decided to increase its stakes in Shriram General Insurance Company (SGIC) and Shriram Life Insurance Company (SLIC) to over 50 per cent each.
The transaction will take Sanlam’s effective shareholding in SGIC to 50.99 per cent from 40.25 per cent at present and in SLIC to 54.40 per cent against a 42.38 per cent stake currently,
In all, the company would pay about Rs 2,327 crore for raising its stake in these insurance firms.
The Cape Town-based firm has the potential to triple the proportion of profit it derives from India within a decade, chief executive officer Paul Hanratty had said recently.
Sanlam has partnered with the Shriram Capital Group in the South Asian nation since 2005 and that country now makes up about 10 per cent of its profit.
“If you ask where our real short-term upside is, it’s India,” Hanratty, 62, had said earlier in an interview with Bloomberg.
“We’ve got a great business with them, growing tremendously. That is our fast-growth outlet,” he had said.
As part of the layered deal, Sanlam proposes to acquire an effective 6.29 per cent in SGIC and 7.04 per cent in SLIC from TPG India Investments II Inc, which will now completely exit these two insurance ventures.
Besides, it proposes the acquisition of 4.45 per cent in SGIC and 4.98 per cent in SLIC from the Shriram Ownership Trust, Sanlam said in a statement.
The disposal of a part of Sanlam Life’s direct holding in Shriram Finance Limited (SFL), which took place on March 28, 2024, for 3.3 billion South African Rand (Rs 1,427 crore) will be used to partly fund the above transaction, it said.
Over and above this, Sanlam has to pay about Rs 900 crore (2.2 billion Rand) for the deal.
However, it said, Sanlam’s effective economic shareholding in Shriram Finance Limited will decrease from 10.19 per cent to 9.54 per cent.
”The consideration payable to acquire the combined 10.74 per cent in SGIC and 12.02 per cent in SLIC will be partially funded, using the net proceeds from the disposal of the SFL shares. The balance of the consideration of ZAR (Rand) 2.0 billion will be funded using a combination of available capital resources,” it said.
The effective date of the transaction will be dependent on the fulfilment of the regulatory conditions and is expected to occur during the second half of 2024, it noted.
The proposed deal is expected to have a marginally positive impact on the net result from financial services and a slightly negative impact on dividends in the initial years, as per the statement.
The net result from financial services and dividends are expected to grow strongly in the medium-to-long-term, it said, adding that the transaction is expected to deliver an internal rate of return on capital deployed well in excess of Sanlam’s internal hurdle rate.
Sanlam currently also owns an effective 26 per cent stake in SVS and the SFL disposal will result in a net decrease of Sanlam’s effective economic shareholding in SFL from 10.19 per cent to 9.54 per cent.
SVS is a subsidiary of Shriram Capital Private Limited (SCPL) and Sanlam currently owns 40.70% of SCPL while the balance is controlled by SOT and its affiliated entities.
Sanlam will do all these deals through its wholly owned subsidiary Sanlam Emerging Markets Mauritius Limited. This transaction will enable Sanlam to further enhance its position in Indian market and drive its growth.