Sanlam Emerging Markets and Shriram Capital Limited transaction

South African financial services group Sanlam today announced the finalisation of a further R2 billion investment in the leading Indian financial services group Shriram Capital Limited (SCL).

Sanlam’s proposed investment into SCL was first announced in September 2011 and has been subject to a number of conditions and regulatory approvals. These have since all been obtained which allowed for the final conclusion of the transaction. The investment in SCL has been made by Sanlam Emerging Markets (SEM), the cluster within Sanlam responsible for financial services in emerging markets outside of South Africa. The acquisition augments its existing portfolio of businesses in Africa and Asia, in support of the Group’s target of sustainable value creation in these growth markets.

Following the transaction, SEM effectively owns of 26% of SCL. The investment has been funded from Sanlam’s surplus capital.

At the release of Sanlam’s interim results for the six months to the end of June 2012 on 6 September 2012, Sanlam Group CEO Dr Johan van Zyl reiterated Sanlam’s strategic emerging market focus in Africa and India.

Mr Heinie Werth, CEO of SEM, said concluding the transaction with Shriram, means a more meaningful exposure for Sanlam in India.

“The transaction will strengthen our relationship with Shriram. Strategically, Sanlam previously entered into insurance joint ventures with the Shriram Group to participate in and benefit from the growing financial services industry in India. This transaction is an important and logical next step for SEM in our relationship with Shriram as it will provide us with access to SCL’s wider financial services exposure in India and will see SEM diversifying its earnings base. In particular this includes exposure to credit businesses and other distribution entities. We foresee synergies across all these business and more opportunities for client cross-selling.

“We are in particular proud to have concluded this transaction with the leadership of Shriram as our partners. We see this transaction as a highlight in the relationship we have enjoyed with the Shriram Group thus far. The strong partnership that we have is further entrenched to the long term benefit of both partners,” Werth said.

Werth added that whilst the economic environment in India is currently somewhat challenging, he remains confident of its longer term potential and that the investment in SCL will in time yield an attractive return.

Sanlam has been in partnership with the Indian Shriram Group in respect of life insurance (Shriram Life) since 2005 and short term insurance (Shriram General) since 2008.

Mr Gopalasamudram Sundararajan, Executive Director for the Shriram Group, said: “Sanlam’s partnership with us has been catapulted to the next level with this investment. We at the Shriram Group wholeheartedly welcome this mutually beneficial alliance.”

SCL, in which SEM has now acquired a 26% stake, is the holding company for the financial services interests of the Shriram Group. Following conclusion of the transaction these consist of a 100% interest in the two insurers, as well as a 25% holding in Shriram Transport Finance Company (“STFC”) - a listed commercial vehicle financing business with an approximate R60 billion loan book, a 30% holding in Shriram City Union Finance (“SCUF”) - a listed retail financing business with an approximate R16 billion loan book, 100% of a distribution business employing 100 000 agents and a start-up wealth management and a brokerage business.