Sanlam Investments forges ahead with expansion in India

Transaction includes JV and stake in Indian stock broking firm

Sanlam’s investment cluster (Sanlam Investments) has taken a strategic step into the growing Indian market. This is a further building block in the Sanlam Group’s strategic objective of becoming a leading financial services provider in the emerging markets of Africa and India. It follows on existing life and general insurance partnerships already operating in India.

The transaction announced today includes the establishment of a joint venture (JV) with SMC, India’s fourth largest securities broking house. The JV will create two businesses – a wealth management company and an asset management company – which will embrace the same business principles as its South African counterparts, and will pave the way for further collaboration for other Sanlam Investments businesses. Sanlam Investments will contribute US$22.5 million to this foray which will be used to capitalise the new joint ventures and also provide a direct nominal equity stake in the main SMC business. The transaction will be financed from existing offshore cash resources. The total financial outlay of Sanlam Investments will depend on the performances of the businesses over time.

SMC has been rated as the fastest-growing retail brokerage house in India with its corporate office in New Delhi, regional offices in Mumbai and Kolkata, and a national network of more than 1350 offices spread across the country.

Johan van der Merwe (pictured), CEO of Sanlam Investments, says this is the first step in its Indian investment strategy and a springboard for further exploring synergies with Sanlam’s other business interests in India and expansion into the sub-continent.

“For us it’s a bold step into one of the biggest markets in the world and a transaction that is in line with our international expansion strategy of furthering our business scope into promising markets outside of South Africa. SMC is a young and vibrant business with a large client base catering to all classes of investors. Although SMC is well known for its extensive pan-India experience, its personal touch and easy accessibility to investors across the country impressed us.”

India represents massive untapped potential with about US $2-trillion in cash deposits in a country where more than 90 percent of the potential investors are currently not utilising financial market instruments. Similar to South Africa, India is also experiencing the emergence of a strong middle class and national pension reforms are imminent.

“The attitude to financial responsibility in India is encouraging, with a 30 percent savings rate, supported by rapidly rising income standards. Our projections show that if we capture only between two and five percent of the expected US$ 1 trillion market by 2015, our business in India could contribute a significant portion to group profits,” says Van der Merwe.

Subhash Chand Aggarwal, chairman and managing director, SMC said, "I am as elated as all my colleagues in SMC Group and Sanlam Groupare aboutthis landmark transaction. SMC is currently ranked the fourth largest listing ‘mobiliser’ in India and we are also the fourth largest in terms of trading terminals. Our customer base exceeds 400 000 – and this is growing at 10000 new accounts per month. Following this JV, the Indian financial services space will see the further rise and transformation ofSMC from our position asone of thelargest securities brokerage house into a globally diversified multinational company.

“Our horizons are now wider than before and our ambitions have a new adrenalin to meetglobal challenges. We firmly believe that the individually strong brands of SMC and Sanlam, coupled with the expert and experienced teams, will set new standards in the financial services space and contribute enormously to the success of this new venture."

Van der Merwe adds, “We have proven expertise in evolving markets and experience in attracting and leveraging discretionary savings. With our tried and tested range of financial products and services – used in emerging markets such as South Africa, Namibia, Botswana, Nigeria, Kenya and Zambia – we believe the Indian market has tremendous opportunities and this joint venture is perfectly placed to take full advantage of these.”

Sanlam Investments’ operations in India will be headed up by Sanjeev Gupta, CEO of Sanlam Emerging Markets, with more appointments planned for the near future. Commenting on how the Sanlam proposition would tap into the market, Gupta added, “There is a lot of goodwill towards South African businesses in India, and very positive relations between the two countries. India’s financial services sector has exceptional growth opportunities and we are looking forward to working with SMC to tap into this potential.”

“Over the next few years our focus will be on growing the asset management and wealth management businesses with strong equity and fixed interest offerings. In addition, we plan to offer risk-based guarantee products and innovative multi-manager solutions. We’ll also be catering for volume-based business targeting the upcoming middle class,” explained Gupta.

Key senior Sanlam Investments staff will be seconded to India with the aim of rolling out products and to build on the company’s investment track record.

The transaction is pending final regulatory approval and relevant legal conditions.