Shriram Group looks to dilute 5% each in life & non-life biz

Financial services conglomerate Shriram group has kick started the process to identify buyers for stakes in both its insurance businesses — life and non-life. The transaction, in preliminary stages, is part of the group’s thinking to unlock cash to fund its aggressive growth plans. Shriram Group and Sanlam are JV partners in the insurance business. “We are looking at dilution of 5% each of the ventures,” said R Thyagarajan founder of the Shriram group.

“Our pre-tax profits are Rs 1,000 crore and valuation expectations are 25 to 30 times the profits. The market values insurance business quite differently now. Investors here are looking at price to premium, instead look at what we have achieved Our premium income is Rs 2,200 crore, and profits are Rs 1,000 crore, unlike other insurance companies where the premium income is high and profits are low,” he said. The group, he said was expecting Rs 25,000 crore as valuations for the non life business business and Rs 5,000 crore as valuation for life insurance business. On the general insurance side, he said that that industry was losing money on business verticals like health, crop etc. “The industry is losing money and to cover up the loses, they end up fudging numbers. We have stayed away from loss making portfolios including health and crop,” he said.

The big difference between Shriram General and other insurers is claims settlement, he said. “A truck operator will get his claims settled on the 36th day from the date of lodging his claim. Other insurance companies in India take one and a half years to settle it. Our model is quite different,” he added.

“We have received early interest from Premji Invest and a couple of PE investors There is an issue with regards to Premji Invest picking stakes in us as they have recently picked up stake in SBI General insurance couple of months ago,” Thyagarajan said. On the life insurance side he said that the group was focussing on selling traditional insurance policies to the middle income and lower income group.

“Most of the insurers sell life products to those who don’t really need it. The target group should be middle and lower income group as the loss of life in that household can wipe away the entire family,” he said. This means that the insurer sells more policies but earns less in premium income as the policy premiums are not very high. “We are the eighth largest private life insurance company in India and 15th largest in new premium income. That should give you an idea of our model,” he added.

As per regulatory filings, Shriram General Insurance company earned a premium income of Rs 1,599 crore upto November, 2019, with a market share of 1.27%.

Shriram Life Insurance earned premium of Rs 425.3 crore upto November, 2019.

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