Johannesburg: South African insurance giant Sanlam has said it will spend almost 2 billion rand (about USD 275 million) in India to buy 26 percent stake in financial services group Shriram.
Sanlam CEO Johan van Zyl said at the company's half-yearly results presentation here that most of the 4 billion rand, which Sanlam had as discretionary capital at the start of the year, would be spent on the Indian investment.
Besides paying 1.9 billion rand for Shriram investment, Sanlam also spent 944 million rand buying back its shares in the company, Van Zyl said.
He said the Indian investment was critical to Sanlam's strategy to expand its presence in the world's largest democracy, where insurance penetration is still low.
"In terms of the agreement with Shriram, Sanlam will subscribe for an effective 26 percent interest in Shriram Capital through a cash contribution of 1.9 billion rand, while Sanlam's 26 percent interest in both Shriram Life Insurance and Shriram General Insurance will also be transferred to Shriram Capital," Van Zyl said.
Analysts welcomed the move into India by Sanlam, saying that the discretionary capital available to the company had become a drag on its balance sheet.
According the results media statement posted on the company's site, Sanlam reached an agreement with the Shriram Group to increase Sanlam’s exposure to the financial services activities of the Indian group.
These are held through Shriram Capital and include commercial financing, retail financing, a distributor of wealth products and stock broking businesses, as well as a majority holding in each of the life and general insurance joint ventures with Sanlam.
Shriram Capital Ltd (SCL) is the holding company for the Financial Services and Insurance entities of the Shriram Group. On a consolidated basis, SCL has an overall customer base of 6.4 million, 33,000 employees across 2,000 offices, with Assets Under Management (AUM) of over Rs 400 billion or Rs 40,000 crore.