South Africa's Sanlam to hike Shriram Capital stake to 26 percent

South Africa insurer Sanlam will pay $265 million for about a quarter of India’s Shriram Capital to increase its financial services business in the fast-growing Asian country, and may enter Mozambique later this year.

Sanlam, which already had stakes in Chennai-based conglomerate Shriram Group’s insurance businesses, said on Thursday it would pay 1.9 billion rand ($265 million) in cash for a 26 percent stake in unit Shriram Capital.

Shriram Capital’s activities include commercial and retail financing, stock broking and the distribution of wealth products the insurer said in a statement.

[caption id=“attachment_82572” align=“alignleft” width=“380” caption=“India’s big market will likely offer solid prospects for Sanlam.Reuters”] [/caption]

India’s big market will likely offer solid prospects for Sanlam, said Safs Narker, an equity analyst and portfolio manager at Momentum Asset Managers.

“They have proven to be quite astute when they deploy capital,” he said.

“There is risk in any market but management have proven that they are quite conservative when they make their investments.”

Financial service firms in Africa’s biggest economy have been entering Asia looking for opportunities presented by the massive populations and rapidly growing middle class.

South Africa’s second-largest bank FirstRand has a full-scale banking licence in India and insurer Discovery said last year it could evetually target India.

Sanlam, South Africa’s second-largest insurer and one of the country’s largest fund managers, also said it was investigating a number of opportunities for expansion into Africa.

Sanlam has operations in seven African countries - including Kenya and Nigeria -and also offers services such as asset management and insurance in Ireland, Australia and the United States.

EARNINGS UP

Sanlam reported a 30 percent increase in diluted headline earnings per share to 109.6 cents in the six months to end-June, compared with 84.1 cents a year earlier.

Headline EPS is the main gauge of profit in South Africa and excludes certain one-time items.

Sanlam said it was helped by an 11 percent increase in new business volumes, particularly life insurance, and an increase in net fund inflows to its asset management unit.

Rival Discovery, South Africa’s largest health insurer, posted a 6 percent rise in full-year headline earnings last week.

Sanlam shares were down 0.4 percent at 26.85 rand at 1212 GMt, paring earlier gains. That compared with a 0.4 percent decline in the Top-40 index .

Reuters