 "Steven Mostert of Sanlam")
South Africa-based Sanlam, a financial services group which was originally established as a life insurance company in 1918, at end of last year invested around Rs 2,500 crore in Shriram Group’s financial service businesses, which estimated to be around Rs 60,000 crore. In his first interview, post the investment of around Rs 1,275 crore in Shriram Capital, holding company of all the Shriram’s financial service businesses, Steven Mostert, Managing Executive of Sanlam India, explains the significance of the investment to T E Narasimhan The company is also said to be interested in infusing more money into Shriram’s financial businesses, especially in insurance. However, the regulation doesn’t allow this now. Some excerpts:
What kind of interest Sanlam has in India?
We see India and China as growth engines of the world. There are lots of areas of mutual co-operation between India and South Africa, especially on both governments and business level.
More and more people have started realising the potential of India and the business we are in (which is financial services specifically insurance). It is currently very under-penetrated in India.
As the disposable income is increasing we find lots of opportunity in India. Of course, you have to get the people educated.
What according to you are the reasons for insurance under-penetration in India?
Insurance penetration in other countries, even in South Africa, you will find in excess of 10%. South Africa is a very matured market and over the last many years people understood their needs and the importance of life insurance. This was mainly due to growing awareness among people. The more you make them financially literate, people start realising that there is a big gain in having an insurance policy.
Of course there is still a long road to travel to get people, especially in the far remote areas including tier II and III towns, where disposable income is increasing. People in these parts of the country can now afford to put their saving into some structured instruments.
What do you expect from the government and the insurance regulator? Rules in India has been perceived as one of the toughest?
The Government is really doing things and trying to stimulate lots of foreign investment.
We would love to see FDI cap to be removed in the insurance sector, which will allow the foreign investor to hold stake till 49%. At present the regulation don’t allow beyond 26%. The move (increasing FDI limit) will also lead to increase in investment by multinational companies.
Finance Minister did a good amount of work to stimulate the economy and doing business in India is easier.
Regulation is tough on the product side no doubt, but in a way it is good also. Because we have seen misspelling of products in other parts of the World and lots of products which doesn’t suit individuals are sold to them.
What does India mean for Sanlam?
South Africa is one of the well penetrated countries, in terms of life insurance. But now, we got into a point where growth is moderate and not as much as we expected. So we have to start looking beyond South African market. We went into Africa and then we came to India in 2004-05 mainly due to growing opportunity and found a good partner. Both the partners are similar, so we are comfortable.
We have done a big investment in Shriram Capital, which gives access to the credit businesses of Shriram Group and it gives much more opportunity within the Group and also gives access to larger customer base.
So it’s a very good growth story for us, we would have love to do better in life insurance side. The industry is in kind of developing phase. It will get better as we move along.
What kind of learning you take back to South Africa from Shriram?
How to do business in the rural areas is one of the key learnings from Shriram, since we foresee good growth in rural parts of South Africa.
So we can take lot of learning from Shriram on how to penetrate and to do business in rural markets.
Besides, Shriram Group’s credit businesses have helped lakhs of people to come up in their life and these businesses have uplifted people and empowered them to be financially sound. This is one more learning we want to take back to South Africa.
Will Sanlam infuse more money in Shriram?
We are certainly open to that, whenever opportunity arises. As I said we have decided strategically that India is a big growth engine for Sanlam and it is important for us to see how we can grow in India. The 26% (a foreign partner can take upto 26% stake in an insurance venture in India), we would love to see it to 49%. But certainly other investment opportunities, within the Shriram Group, will also be capitalized whenever the opportunity arises.
Will you be looking beyond Shriram Group for investment opportunities in India?
Very difficult to give a definite yes, we have taken a deliberate decision to have Shriram as our partner in India. So, really, from our side we will try to do things as much as possible within the partnership with Shriram group.
