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Shriram Life Insurance Company (SLIC) today said the proceeds from the possible divestment of equity in favour of its overseas joint venture partner, Sanlam, would be entirely used to fund the business expansion as it has been more than self-sufficient in meeting the internal financial parameters prescribed by the insurance regulator.
The South African financial services group, which already holds 26 per cent equity in Shriram Life and also in its holding company Shriram Capital Limited, is keen on raising its stake in the insurance firm.
“Both Sanlam and Shriram Capital have been seized of the matter,” Manoj Kumar Jain, wholetime director and CEO of Shriram Life, told reporters here on Friday as decks for increasing foreign direct investment (FDI) in the insurance sector has been cleared with the passage of Insurance Bill in the Rajya Sabha. The foreign partner can now hold up to 49 per cent equity in an Indian insurance company.
This allows Sanlam to have an additional 23 per cent equity in the Indian joint venture.
Shriram Life currently maintains a solvency ratio of 5 per cent, as against the regulatory requirement of 1.5 per cent, according to Jain. “Therefore, we do not need money except for expanding our business,” he said. Already working in this direction, the company added 235 branch offices last year.
According to Shriram Life officials, various options are being explored to facilitate the increase of Sanlam’s stake.
Sanlam may directly increase its equity in Shriram Life or indirectly increase its stake by enhancing its equity in the holding company, or may raise the stake in both as the Shriram group wants its foreign partner to hike its stake up to 33 per cent at the holding company level itself.
“We need money to expand the business as we incur a lot of cost to open new branches. We would also explore new business opportunities with the money coming from Sanlam,” Cassie Cromhout , chief operating officer of Shriram Life, who is from Sanlam, said while maintaining that they see a lot of growth potential for the company.
According to Jain, Shriram Life is expected to collect a total business premium of 750 crore this year, a 25 per cent growth as compared with Rs 600 crore last financial year. As of January, 2015, the life insurance industry registered a negative growth of 9 per cent due to a steep fall in Life Insurance Corporation of India (LIC)'s business while the private insurance sector registered a growth of 19 per cent in total business premium.
The company on Friday announced the launch of three new products including a single premium product with a policy term of 5-15 years.
