Shriram to boost insurance arms

Looks to divest a part of its stake in general insurance venture

Shriram Capital has, after the Rs 2,000-crore capital infusion by the Piramal group, readied plans to to aggressively push both its life and general insurance ventures.

R Thyagarajan, group founder and chairman, said his finance companies were currently well capitalised and didn't require capital infusion from Shriram Capital.

"Since we are in partnership with (South Africa-based) Sanlam, we would explore the possibilities of going into insurance outside India. Since Sanlam is enthusiastic about life and general insurance in the Asian region, we would like to go with Sanlam in expanding insurance operations in some countries in Asia," he said.

Shriram Life Insurance has been profitable and aims to have a 20 per cent growth in premiums for FY14.

Shriram Capital — the holding company for as many as five businesses, including Shriram Transport Finance Company — inked a deal with Piramal Enterprises (PE) where the latter will acquire a 20 per cent stake in it for Rs 2,014 crore. PE already owns a 10 per cent stake in the transport finance company, bought from private equity firm TPG in May last year.

Piramal's latest investment is in the holding company, which has interests in Shriram Life Insurance and General Insurance, retail broking, an asset management company and Shriram City Union, which is in the secured and unsecured loan market.

Shriram's insurance ventures, Shriram Life Insurance and Shriram General Insurance, have been making money since inception. The life insurance venture is a joint venture with the Sanlam Group of South Africa.

Manoj Jain, chief executive officer, had earlier told Business Standard that being a late entrant, they did not have any bank partner; the bulk of the segment's business is coming from bancassurance. Latest numbers from the Insurance Regulatory and Development Authority show the life insurer’s premiums were down six per cent, in line with the decline in the private life insurance space.

While those in the segment maintain a bancassurance partner is the way ahead for growth in life insurance companies, Shriram Life has other plans. Thyagarajan said their life insurance venture in India will be a Sanlam company, since the South Africa- based group has a better experience of running this business. Hence, wherever Sanlam goes out for acquisitions or stake purchase, Shriram Life Insurance will go with it, even if it means only a token investment from its side.

Johan van Zyl, group CEO of Sanlam, said in the Asian region, Shriram also had excellent human resources that could be deployed. "We try not to cater to the mass affluent segment. The lower end of the middle class is where our focus has been, where there is a big opportunity. There may be other opportunities with our partners. In the short term, we are looking at Malaysia,” said Zyl.

In April, Sanlam Emerging Markets (SEM), part of Sanlam, had said that it would acquire 51 per cent of MCIS Zurich Insurance Berhad for approximately ZAR 1.25 billion (Ringgit Malaysia 387.6 million).

SEM will reach its 51 per cent interest in two phases – first through the acquisition of a 40 per cent interest from Koperasi (in a back-to-back transaction with Zurich Asia Holdings, followed by a further 11 per cent through a take-over offer to minority shareholders that will directly follow SEM’s initial 40 per cent acquisition.

At home, Shriram Life has also expressed interest in the several insurance merger and acquisition opportunities in the Indian market. However, Thyagarajan says at this stage he does not know whether there will be a meaningful merger for their business.

On the general insurance side, in which the group has 100 per cent, Thyagarajan said they were open to selling a part of stake to preferably a corporate entity, which in turn will bring business for the insurer.

Shriram General Insurance has a little over 90 per cent business from the motor insurance space. Health and other lines of business contribute a minor percentage to the overall portfolio.

This too, has been a conscious decision by the group, to ensure that they do not enter a loss-making situation. Thyagarajan said the business in other segments was not profitable and so they'd decided to stay away from those.