The Chennai-based chits and truck-financing major, Shriram Group, has entered a 74:26 JV with the South African Sanlam Group to make a foray into the Life Insurance space in India. The new entity, called the Shriram Life Insurance Company Limited, is expected to commence operations from August 2005. The company is awaiting approvals from the IRDA.
Speaking to newspersons to announce the company's new venture, R Thyagarajan, Chairman of the Shriram Group, explained that insurance was one of the group's key focus areas and a natural progression given its strengths of financial expertise and strong distribution network. He said, "The operations would start in August, and at any rate not later than September 15. To start with, we would offer traditional policies that will be easy to understand. Later on, we will definitely look at innovations. We hope to achieve a premium of Rs 150 crore in the first year of operations."
The new entity would be based at Hyderabad. The group's venture was driven by the low penetration levels of life insurance in India, where the per capita life insurance premium is at Rs 590. The group is bullish on the further growth of life insurance, which has been rapid so far, thanks to the entry of private players.
On promoting the life insurance products, Thyagarajan said, "We won't be advertising on the scale that some of the private players are doing. But we will definitely look at promoting the products. We haven't finalised the plans as yet."
He added that the launch would be pan-India, but admitted that in the first year, 75 to 80 per cent of the business would come from South India, the group's home terrain. The company's presence in India spans 600 offices, with 10,500 employees and 65,000 agents working almost exclusively for the group.
For the Sanlam Group, the foray is part of its strategy to explore international opportunities, according to Lize Lambrechts, CEO, Sanlam Life. On the name of the company not including the South African venture-partner, she said, "We've done some research and felt that the Shriram name holds a lot of promise in this part of the world. The name Sanlam doesn't mean much to the Indian market. Therefore we decided to make the company name Shriram."
A significant portion of the business is expected to come from the Shriram channels. A leader in chits, the group manages funds of over Rs.6,700 crore in its truck financing business alone, and has a presence in consumer durable financing, insurance broking and stock broking businesses. YES Bank was the strategic and financial advisor to the Shriram group for the transaction.