Sanlam to Raise Stake in Shriram Insurance Firms

New Delhi, Apr 5 (PTI) South Africa-based Sanlam Ltd on Friday said it is planning to increase its stake in Shriram General Insurance Company (SGIC) and Shriram Life Insurance Company (SLIC) to over 50 per cent each.

The transaction will take Sanlam's effective shareholding in SGIC to 50.99 per cent from 40.25 per cent at present and in SLIC to 54.40 per cent against a 42.38 per cent stake currently, it noted.

As part of the layered deal, Sanlam proposes to acquire an effective 6.29 per cent in SGIC and 7.04 per cent in SLIC from TPG India Investments II Inc.

Besides, it proposes the acquisition of 4.45 per cent in SGIC and 4.98 per cent in SLIC from the Shriram Ownership Trust, Sanlam said in a statement.

The disposal of a part of Sanlam Life's direct holding in Shriram Finance Limited (SFL), which took place on March 28, 2024, for 3.3 billion South African Rand (Rs 1,427 crore) will be used to partly fund the above transaction, it said.

Over and above this, Sanlam has to pay 2.2 billion Rand (about Rs 900 crore) for the deal.

In all, the company would pay about Rs 2,327 crore for raising its stake in these insurance firms.

However, it said, Sanlam's effective economic shareholding in Shriram Finance Limited will decrease from 10.19 per cent to 9.54 per cent.

"The consideration payable to acquire the combined 10.74 per cent in SGIC and 12.02 per cent in SLIC will be partially funded, using the net proceeds from the disposal of the SFL shares. The balance of the consideration of ZAR (Rand) 2.0 billion will be funded using a combination of available capital resources," it said.

The effective date of the transaction will be dependent on the fulfilment of the regulatory conditions and is expected to occur during the second half of 2024, it noted.

The proposed deal is expected to have a marginally positive impact on the net result from financial services and a slightly negative impact on dividends in the initial years, as per the statement.

The net result from financial services and dividends are expected to grow strongly in the medium-to-long-term, it said, adding that the transaction is expected to deliver an internal rate of return on capital deployed well in excess of Sanlam's internal hurdle rate.

"The Sanlam Board recognises India as a core market and strategic pillar to achieving long-term earnings growth and sustainable shareholder value creation for Sanlam. This Transaction will enable Sanlam to further enhance its position in this important market and drive growth," it said.