Sanlam gets nod to invest in Indian financial services firm
Insurer buys R2bn, 26% stake in financial services company
SANLAM has by the stroke of a pen and an investment of R2bn laid stake to a major Indian financial services company that has interests in the insurance, commercial and retail financing businesses. Yesterday, the JSE-listed group announced the completion of the acquisition of a 26% stake in Shriram Capital after receiving the outstanding regulatory approvals. Sanlam is funding the deal from its own resources.
SANLAM, by the stroke of a pen and an investment of R2bn, has laid claim to a stake in a major Indian financial services company that has interests in the insurance, commercial and retail financing businesses.
Yesterday, the JSE-listed group announced the completion of the acquisition of a 26% stake in Shriram Capital after receiving the outstanding regulatory approvals. Shriram Capital is the holding company for the financial services interests of India’s Shriram Group, which also has interests in sectors such as manufacturing, engineering and information technology.
The deal, which Sanlam is funding from its own cash resources, has been done through Sanlam Emerging Markets, the unit the group is using to expand into emerging markets.
Local financial services companies are eyeing India’s large, underpenetrated banking and insurance sectors and appear undaunted by the formidable competition from established rivals and global banking institutions.
Rival Old Mutual already has an insurance business in India, while MMI Holdings is scouting for opportunities in the world’s largest democracy. Banking group FirstRand is also invested in India, having initially started with an investment banking franchise and subsequently launched a retail unit in April.
Sanlam CEO Johan van Zyl has previously stated that the group has appetite for acquisitive and organic growth focused mostly on emerging markets in Africa and Asia. Another unit of the group — Sanlam Private Investments — has also been on an acquisition spree, having this year bought a clutch of businesses and now manages R120bn and 400 employees.
Sanlam had about R4bn as of June in discretionary capital to fund growth, and part of the funds are expected to finance a planned acquisition of a 49% stake in Malaysian insurer Pacific & Orient. Sanlam has since submitted proposals to invest in the company to Malaysia’s central bank.
The Shriram Capital deal cements a strategic relationship Sanlam has had with the group’s insurance units since 2005.
Buying a stake in the business was the next logical step for the group as it provided wider exposure to India’s financial services sector while widening Sanlam Emerging Markets’ earning base, said its CEO, Heinie Werth. “In particular this includes exposure to credit businesses and other distribution entities. We foresee synergies across all these business and more opportunities for client cross-selling,” he said yesterday.
Sanlam said in a regulatory announcement yesterday that the acquisition augmented its existing portfolio of businesses in Africa and Asia, in support of the group’s target of sustainable value creation in these growth markets.