 "We are interested in increasing stake in Shriram: Johan Van Zyl")
South Africa-based financial services group Sanlam, which had invested around Rs 2,500 crore in the Shriram Group's financial service businesses in 2012, has vibrant plans for future investments. In an interview with T E Narasimhan, Sanlam group chief executive Johan van Zyl said Sanlam was interested to increase its stake in the insurance venture and would look at inorganic growth. Edited excerpts:
It has been over two years since Sanlam invested in Shriram Capital. What was Sanlam’s experience in India and are you happy with the investment?
Our relationship with Shriram started in 2005 when we entered the Indian market by launching Shriram Life in partnership with Shriram Group. Sanlam invested Rand 2 billion for an effective 26 per cent in Shriram Capital in 2012, which gave us a wider exposure to broader financial services in the Shriram Group covering life, general insurance and credit businesses.
It was always our intention to increase our stake in insurance businesses to 49 per cent when permitted by local regulations. We are comfortable with Shriram as our partner and the performance of the businesses makes the decision easier. In fact, we have made provision to increase our stake as part of the original shareholder agreements.
Earlier, Shriram Group said Sanlam and Shriram together would look at acquisitions in Southeast Asia? What makes you partner with Shriram abroad?
Our expansion into emerging markets has always included Africa, India and Southeast Asia. We are willing to explore opportunities in the region jointly with Shriram. The opportunity and skills required on any investment will determine the collaboration between us and Shriram. Shriram has recently acquired a 50 per cent stake in Monarch, a general insurance company in the Philippines. So, from our point of view, it is logical to partner with Shriram to expand in the region to accommodate their regional aspirations.
Reports stated Sanlam was also interested in applying for a banking licence. Is it true?
Shriram Capital had applied for a banking licence as the banking venture banking will be complementary to their existing businesses and there is a huge opportunity to serve the un-banked in rural areas where Shriram has a huge presence.
Will Sanlam look beyond Shriram Group for investment opportunities in India?
Shriram is our business partner in India and our strategy is to do more with our current business partners. At this juncture we have no plans to enter into any new partnerships in India.
Overall, what is Sanlam’s view on investment and the regulatory environment in India; and what is the way forward for Sanlam?
Sanlam is very happy with the return on investment which exceeds our internal hurdle rates, and that the Shriram Group is ideally positioned for growth in India. The benefit of Sanlam’s partnership model is that we entrust the local board and management to drive the growth while our local management is best positioned to navigate the complex regulatory environment.
What, in your view, are the reasons for insurance/financial inclusion under-penetration in India?
Typically financial institutions find it difficult to establish a presence in rural areas due to lack of infrastructure, skilled people and the cost of operations. Shriram’s focus for many years has been on Tier II and III towns and the group had managed to create a large presence in the under penetrated rural areas.
What do you expect from government and insurance regulator?
In an already tough regulatory environment we expect more regulations to be implemented. We expect regulations from the matured countries would be adopted. Needless to say, it is very challenging to implement regulations from more matured markets in a less developed market. Given the low insurance penetration in India there is an opportunity to grow the market which offers a huge upside for both the life and general insurance businesses. The credit businesses are well placed in locations where competitors will find it hard to compete.
What kind of learning do you take back to South Africa?
The Shriram way of doing business is a 'no frills' approach. Shriram Group is one of the most respected businesses in India with a rich heritage and a successful business strategy. Sanlam has long admired the group’s commitment to business excellence, values and financial inclusion initiatives. These are the characteristics that drew us to Shriram, which we believe are common to our businesses and entrench the strong partnership we enjoy with Shriram.
It has been over two years since Sanlam invested in Shriram Capital. What was Sanlam’s experience in India and are you happy with the investment?
Our relationship with Shriram started in 2005 when we entered the Indian market by launching Shriram Life in partnership with Shriram Group. Sanlam invested Rand 2 billion for an effective 26 per cent in Shriram Capital in 2012, which gave us a wider exposure to broader financial services in the Shriram Group covering life, general insurance and credit businesses.
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Will Sanlam look at increasing stake in Shriram?
It was always our intention to increase our stake in insurance businesses to 49 per cent when permitted by local regulations. We are comfortable with Shriram as our partner and the performance of the businesses makes the decision easier. In fact, we have made provision to increase our stake as part of the original shareholder agreements.
Earlier, Shriram Group said Sanlam and Shriram together would look at acquisitions in Southeast Asia? What makes you partner with Shriram abroad?
Our expansion into emerging markets has always included Africa, India and Southeast Asia. We are willing to explore opportunities in the region jointly with Shriram. The opportunity and skills required on any investment will determine the collaboration between us and Shriram. Shriram has recently acquired a 50 per cent stake in Monarch, a general insurance company in the Philippines. So, from our point of view, it is logical to partner with Shriram to expand in the region to accommodate their regional aspirations.
Reports stated Sanlam was also interested in applying for a banking licence. Is it true?
Shriram Capital had applied for a banking licence as the banking venture banking will be complementary to their existing businesses and there is a huge opportunity to serve the un-banked in rural areas where Shriram has a huge presence.
Will Sanlam look beyond Shriram Group for investment opportunities in India?
Shriram is our business partner in India and our strategy is to do more with our current business partners. At this juncture we have no plans to enter into any new partnerships in India.
Overall, what is Sanlam’s view on investment and the regulatory environment in India; and what is the way forward for Sanlam?
Sanlam is very happy with the return on investment which exceeds our internal hurdle rates, and that the Shriram Group is ideally positioned for growth in India. The benefit of Sanlam’s partnership model is that we entrust the local board and management to drive the growth while our local management is best positioned to navigate the complex regulatory environment.
What, in your view, are the reasons for insurance/financial inclusion under-penetration in India?
Typically financial institutions find it difficult to establish a presence in rural areas due to lack of infrastructure, skilled people and the cost of operations. Shriram’s focus for many years has been on Tier II and III towns and the group had managed to create a large presence in the under penetrated rural areas.
What do you expect from government and insurance regulator?
In an already tough regulatory environment we expect more regulations to be implemented. We expect regulations from the matured countries would be adopted. Needless to say, it is very challenging to implement regulations from more matured markets in a less developed market. Given the low insurance penetration in India there is an opportunity to grow the market which offers a huge upside for both the life and general insurance businesses. The credit businesses are well placed in locations where competitors will find it hard to compete.
What kind of learning do you take back to South Africa?
The Shriram way of doing business is a 'no frills' approach. Shriram Group is one of the most respected businesses in India with a rich heritage and a successful business strategy. Sanlam has long admired the group’s commitment to business excellence, values and financial inclusion initiatives. These are the characteristics that drew us to Shriram, which we believe are common to our businesses and entrench the strong partnership we enjoy with Shriram.