Shriram Group, a market leader in chit fund and the pre-owned truck lending business, said it plans to run insurance businesses in developing countries in Asia and Africa, in a bid to expand its operations overseas, making it the first private Indian insurer to foray overseas.
One of the other players in the overseas market, Life Insurance Corp. (LIC) is a public sector insurer and has set up two subsidiaries in Bahrain and Nepal, and a joint venture in Sri Lanka.
Chennai-based Shriram Group, which manages more than Rs13,000 crore of assets, will create a separate entity for this overseas foray.
South Africa-based Sanlam Ltd, which holds 26% of Shriram Life Insurance Co. Ltd, is likely to pick up stake in this new entity. Other investors will also be offered a stake in the business. The projected investment in the first year of operations is likely to be Rs100 crore for the project.
“We will work along with local partners in the countries we enter”, said R. Thyagarajan, chairman of Shriram Group companies. “The investment will help us to participate in the management so that we can offer our expertise.”
The group has already acquired stake in an insurance company based in the Philippines. Shriram Group plans to start its operations in Philippines and Indonesia by March 2008, and, thereafter, in Malaysia.
The holding company of Shriram Group will fund the capital requirements of the project. The group’s two non-banking finance companies, Shriram Transport Finance Ltd and Shriram City Union Finance Ltd are not likely to participate in the venture.
For entering into the African market, Shriram would need permission from Sanlam Ltd, as the existing agreement for life insurance joint venture prevents Shriram from operating in Africa. Shriram Group, which started the life insurance business in January 2006, is hopeful of getting the nod from Sanlam, said Thyagarajan.
Apart from investing in insurance companies, the new entity will help local entrepreneurs to set up insurance related service businesses such as broking, distribution and risk evaluation.
Shriram Group has also tied up with Sanlam, which had sales of $10 billion (Rs40,400 crore) last year, for non-life insurance venture in India. Bank of Maharastra is the third partner in the proposed venture, for which permission from Insurance Regulatory and Development Authority (Irda) is awaited.
The equity sharing arrangement between the three partners will be announced within a fortnight. The initial equity capital for the non-life venture would be Rs105 crore, the minimum stipulated by Irda, said Thyagarajan.