Want to build biz in India for 100 years: Shriram Capital-Sanlam executives

Executives talk about their plans for the wealth management business and the group's banking ambitions

Shriram Capital, the holding company of the Shriram Group, is set to foray into the wealth management business in India in partnership with the Sanlam Group of South Africa. Sanlam Chief Executive Officer PAUL BRENDAN HANRATTY, Shriram Capital MD & CEO SUBHASRI, and Sanlam Executive (Group Strategy, M&A) and Head of Asia Region Sanlam DAVID MARSHALL spoke with Subrata Panda and Vishal Chhabria in Mumbai about their plans for the wealth management business and the group’s banking ambitions. Edited excerpts:

 

What is the idea behind foraying into wealth business? 

Paul: We started our journey in the insurance space. But, as South Africa’s population got wealthier, so in time developed the need for wealth products. We see it as a natural evolution that as the Indian economy grows, clients will get wealthier, and, ultimately, they will need these products. We think that this is a natural business for Shriram Group to get into. India is going to be the second-biggest economy in the world by 2050. With that is going to come the rise of wealth management.

 

There are very few barriers to entry. So, there will be many participants. But we believe that Shriram’s reputation for trust, for putting the customer first, and even the way in which the management has conducted themselves over a very long period of time is an essential ingredient to long-term success in this industry.

 

Subhasri: From a timing perspective, I think our insurance businesses have reached a level of stability. So, it’s a good time for Sanlam and Shriram to come together and build the next big opportunity in India in the financial services space. We will build a wealth management business, which is good for our customers. It is wealth management for all. It is not a privilege of the few. It is not something only for the rich and very ultra-rich.

 

Will there be some kind of minimum investment requirement for the customer? 

Subhasri: I don’t think we need to have a minimum threshold, but fortunately in Shriram, we have products like fixed deposits and insurance that we can easily package and take the customer to that minimum threshold limit. We have a suite of products within the Shriram system, which will ensure that everyone has got a product that is most suited for them.

 

What is the structure of investment? 

Paul: It’s a joint venture. We are planning to be equal partners, both in the AMC as well as the wealth business.

 

What kind of investments are you looking at in the next two three years? 

Subhasri: We expect that both these businesses will require anywhere between ~300 to 400 crore, which we should be able to support from Sanlam and Shriram.

 

Have you started hiring for the wealth management business? 

Subhasri: The entire senior management are on board. More than 80 relationship managers and executors have already come in. The advisory team is also ready. Technology is work in progress, and we should be ready in a few weeks.

 

How would you differentiate your wealth business from the others? 

David: We aim to make wealth management accessible to everyone, not just the very wealthy. By leveraging technology, we can ensure its viability even at the lower end of the market. We stand ready as the partner with all the solutions. We will be led by our local partner here.

 

Paul: When people talk about wealth and asset management, they think about just managing the assets. Our strength at Sanlam has been not only to manage the money but to create solutions for people as opposed to trying to maximise the margin that we have. The other thing that will differentiate us is: we are going to focus only on making money when our clients are successful.

 

Have you set any targets on how much assets under management (AUM) you want to achieve? 

Paul: What we want to see is steady growth and this market is huge. You have got a sizable percentage of the world’s population in a rising economy. So, why would you want to build it quickly? It will still grow really quickly by global standards if you do it properly.

 

David: We are taking a 50 to 100-year view on India. So it’s about getting the foundations in place but we will deploy funds as and when subject to business cases.

 

What is your plan for the advisory team? 

Paul: The intention would be to have our own bespoke in-house team. Obviously we will access the best assets from different places but the research needs to be controlled in a central way otherwise you run the risk of quality.

 

David: Within any multinational wealth management business, there are some elements that are global and are transferable across markets. You also need the local research of the people that are specifically versed in Indian stocks and that needs to be built up in the country. There are elements that we have already made that can help this business get started fast and there are some other elements Shriram has been investing in locally and will continue to.

 

Will you push Shriram products more or will it be dependent on customer preferences? 

Subhasri: We will definitely tie up with third parties for products. We are very confident our products have their own advantage or superiority. But it is not a wealth management company to sell Shriram products.

 

Is Sanlam looking to increase stake in the two insurance ventures with Shriram Group? 

Paul: Our philosophy is strong local partnerships everywhere we go. We never try to own 100 per cent of anything outside South Africa.

 

Subhasri: This is a partnership of over 20 years. They have moved from 26 per cent to above 50 per cent. There are many insurers in India where the joint venture partner is sitting in front. Its Shriram Life Insurance and Shriram General Insurance are powered by Sanlam Group. It’s a partnership of mutual respect. We have crossed the time when we are holding onto the percentages.

 

Do you have any plans to list the insurance companies? 

Subhasri: There are much larger institutions in the insurance space, which are yet to go public.

 

David: One of the reasons to go public is you need to raise capital. In this instance, capital is not really a factor anytime soon.

 

Paul: Another reason for an IPO is that the sponsors want an exit. We want to build business in India for the next 100 years. We definitely don’t want an exit. We don’t need capital as well. So, from our side, there is no motivation to go public.

 

What is the update on foray into asset reconstruction companies space? 

Subhasri: We are yet to get the certificate of registration. It’s been a little longer than we expected.

 

Are you looking to convert Shriram Finance into a bank? 

Subhasri: Converting into a bank is not a Shriram decision alone. Our partnership with the Sanlam Group is not exclusively in the insurance business or wealth management business. Our tie-up with them, irrespective of the percentage, is equal in the holding company as well. Therefore, the decision to convert into a bank will be in consensus with the Sanlam Group. Today, both partners think that we are good where we are. So, to step away and take a leap of faith is probably not something we require right now.