 "India operations counter-balance the ones in Southern Africa: Ian Kirk")
A little over a decade before, South African financial conglomerate Sanlam was looking at opportunities in the world; it chose India, investing around $500 million in various businesses of the Shriram Group, now led by Ajay Piramal and worth Rs 100,000 crore. Ian Kirk, group chief executive officer, spoke to T E Narasimhan and Gireesh Babu during his recent visit to Chennai and discussed the group's additional $100-mn investment plan here.
Edited excerpts:
It has been 10 years since Sanlam joined hands with the Shriram Group. How has the journey been?
Our relationship started in 2004, when both partners came together to float a life insurance firm in India. The life insurance company started in 2006. Sanlam was keen on expanding its presence outside Africa and the two countries that came on top were China and India. The group decided to go ahead with India, due to size of the market, regulations/legislation, the partner and lower penetration (of insurance).
Shriram was in the credit business and needed technical expertise for underwriting; it was looking for a European partner. In 2006, the partners also decided to start general insurance. It has been a good experience for Sanlam and a profitable investment (last year, the profit from India was around $60 million in all). So far, around $500 mn has been invested in Shriram Capital (SCL, holding company of the Shriram Group's financial businesses) and some of the individual group companies in Shriram Capital.
Sanlam was planning to buy stake in Shriram Life and the non-life business. What is the status and what will be the investment?
We’re in the final stage of acquiring 23 per cent stake in Shriram Life and Shriram non-life, for (a little) less than $100 mn. Once the stake is acquired, Sanlam will hold 23 per cent directly and another 26 per cent indirectly (through SCL).
The increased stake will give us a greater economic interest, with the same effort. If you like a business, you must take as much as you can. We never wanted to control the business; it must be controlled by Indians.
(Shriram's life and non-life insurance ventures were originally floated along with Sanlam but later Sanlam's holding was transferred to SCL as part of restructuring. Sanlam picked up 26 per cent stake for Rs 1,600 crore in SCL).
Originally, it was only Shriram and Sanlam but Ajay Piramal has now come into the group. How is the ownership structured and what will be Piramal’s role and Sanlam’s?
For Shriram Capital, Ajay is the chairman; Shriram Ownership Trust has got the major stake and Sanlam is the second largest share holder. RT (R Thyagarajan, founder of Shriram Group) is clear all three will be equal and he asked Piramal to lead SCL. We can't share who is holding how much in SCL.
As far as Sanlam is concerned, we always wanted to be a partner, not to control. We are happy to see Piramal as managing partner and he will lead SCL. We are very happy with the way the change happened. He is a modern and successful Indian entrepreneur.
How important India as a market for Sanlam?
The operations here are counter-balancing the South African market, where in a few countries the growth is challenging, due to various factors. Growth in India is much faster. Africa would be 75 per cent in terms of our capital allocation and 70 per cent of the profitability; India would be about 15 per cent — 10 per cent in capital and a little higher on profitability. In the next seven years, it will be probably 60:40 between Africa and India-Malaysia. In the India-Malaysia business, India will be the largest. We will always have a capability in Europe but it will be less than 10 per cent. So, it will be 60:40 of the rest of the 90 per cent.
What is SCL’s current size of assets under management and what growth is expected?
Around Rs 1 lakh crore and expected to grow at above 15 per cent (a year).
You had plans to go to neighbouring countries with Shriram?
There was some focus on that in the past but I don’t see that much today. Since Piramal got involved, he is very active. He felt we should delay that and there is a massive opportunity for us to explore in India itself.
Edited excerpts:
It has been 10 years since Sanlam joined hands with the Shriram Group. How has the journey been?
Our relationship started in 2004, when both partners came together to float a life insurance firm in India. The life insurance company started in 2006. Sanlam was keen on expanding its presence outside Africa and the two countries that came on top were China and India. The group decided to go ahead with India, due to size of the market, regulations/legislation, the partner and lower penetration (of insurance).
Shriram was in the credit business and needed technical expertise for underwriting; it was looking for a European partner. In 2006, the partners also decided to start general insurance. It has been a good experience for Sanlam and a profitable investment (last year, the profit from India was around $60 million in all). So far, around $500 mn has been invested in Shriram Capital (SCL, holding company of the Shriram Group's financial businesses) and some of the individual group companies in Shriram Capital.
Sanlam was planning to buy stake in Shriram Life and the non-life business. What is the status and what will be the investment?
We’re in the final stage of acquiring 23 per cent stake in Shriram Life and Shriram non-life, for (a little) less than $100 mn. Once the stake is acquired, Sanlam will hold 23 per cent directly and another 26 per cent indirectly (through SCL).
The increased stake will give us a greater economic interest, with the same effort. If you like a business, you must take as much as you can. We never wanted to control the business; it must be controlled by Indians.
(Shriram's life and non-life insurance ventures were originally floated along with Sanlam but later Sanlam's holding was transferred to SCL as part of restructuring. Sanlam picked up 26 per cent stake for Rs 1,600 crore in SCL).
Originally, it was only Shriram and Sanlam but Ajay Piramal has now come into the group. How is the ownership structured and what will be Piramal’s role and Sanlam’s?
For Shriram Capital, Ajay is the chairman; Shriram Ownership Trust has got the major stake and Sanlam is the second largest share holder. RT (R Thyagarajan, founder of Shriram Group) is clear all three will be equal and he asked Piramal to lead SCL. We can't share who is holding how much in SCL.
As far as Sanlam is concerned, we always wanted to be a partner, not to control. We are happy to see Piramal as managing partner and he will lead SCL. We are very happy with the way the change happened. He is a modern and successful Indian entrepreneur.
How important India as a market for Sanlam?
The operations here are counter-balancing the South African market, where in a few countries the growth is challenging, due to various factors. Growth in India is much faster. Africa would be 75 per cent in terms of our capital allocation and 70 per cent of the profitability; India would be about 15 per cent — 10 per cent in capital and a little higher on profitability. In the next seven years, it will be probably 60:40 between Africa and India-Malaysia. In the India-Malaysia business, India will be the largest. We will always have a capability in Europe but it will be less than 10 per cent. So, it will be 60:40 of the rest of the 90 per cent.
What is SCL’s current size of assets under management and what growth is expected?
Around Rs 1 lakh crore and expected to grow at above 15 per cent (a year).
You had plans to go to neighbouring countries with Shriram?
There was some focus on that in the past but I don’t see that much today. Since Piramal got involved, he is very active. He felt we should delay that and there is a massive opportunity for us to explore in India itself.