Global private equity major KKR & Co has signed a definitive agreement to acquire a 9.99% stake in Shriram General Insurance taking forward the Shriram Group’s plan to spin its insurance business into a separate entity.
VCCircle had first reported KKR's interest in Shriram General Insurance exclusively in December last year. "The equity dilution of 9.99% stake in the company bought by KKR was for a consideration of nearly Rs 1,800 crore ($237 million) at an enterprise value of Rs 18,000 crore," confirmed Anil Kumar Aggarwal, Managing Director and CEO of Shriram General Insurance. KKR would also get a Board seat with the acquisition.
KKR’s investment will help Shriram General Insurance’s continued expansion into new segments and investment in its digital capabilities to meet the evolving needs and preferences of Indian consumers, Shriram Group said in a statement.
Post merger, KKR will hold 9.99% stake, Sanlam Group would own 23% stake and the remaining shareholding will be held by Shriram Capital.
The KKR investment comes after Shriram group announced its plans to consolidate its lending arms - Shriram City Union Finance and Shriram Transport Finance - into a single entity called Shriram Finance Ltd. The insurance and mutual fund companies of the group have been kept out of the merger.
Founded in 2008, Shriram General Insurance is a joint venture between Shriram Capital, the holding company for Shriram Group’s financial services business and South Africa’s Sanlam Limited which owns a 23% stake in Shriram General Insurance Ltd., with Shriram Capital owning the remaining stake.
“We currently rank among the third or fourth profitable private general insurance company in the country...KKR's India head Gaurav Trehan has observed our company's growth for the last 10-12 years. Our gross premium as on March end 2022 stood at more than Rs 1750 crore. We foresee a growth of 30% in the year ahead,” said Aggarwal.
The acquisition is subject to necessary regulatory approvals.
Jaipur-based Shriram General Insurance offers general insurance products ranging from Motor, Travel, Home and Personal Accident in the retail space to customised products such as Fire, Engineering, and Marine Insurance in the corporate space.
As of December 31, 2021, the insurer holds a solvency margin ratio of 4.70 as against regulatory requirement of 1.5. As of March 31, 2022, seven times of capital invested has been paid as a dividend, and the Company manages assets worth Rs 10,685 crore and 4.344 million live policies. The 13-year-old firm operates across 203 branches in 26 states and/ union territories with a headcount of 3083 employees.
"We will be recruiting heavily in the next four years. We plan to have around 5000 people in the next 12-24 months...We are also expanding digitally through a Super app launched last week," J.S. Gujral, vice chairman of Shriram General Insurance.
Aggarwal added, "Shriram General Insurance is the only domestic private company with presence in Philippines. We would also like to explore the eastern part of the world and look at Malaysia or Indonesia apart from domestic expansion. Further, we plan to look at inorganic growth as well if we find an ideal fit into our system. Our warchest is reasonably large enough to acquire another entity. But no going talks or anything concrete as of now."
Shriram General Insurance, which sees 95% of its revenues from motor insurance business, aims to reduce it to 90% in the year ahead. It reported a gross premium of Rs 2,153 crore for FY21, against Rs 2,473 crore in FY20. Its profits declined from Rs 741.2 crore in FY20 to Rs 592.4 crore in FY21 impacted by the covid pandemic. As on December, its profit after tax was at Rs 467 crore.
Separately, Chennai-based group has announced a succession plan in November, which transferred the promoter ownership into a separate trust.
“Shriram General Insurance has been one of the standout performers in India’s fast-growing general insurance industry, and continues to build on their record by developing new capabilities, channels, and products to meet the growing needs of Indian consumers. We are truly excited to work with the Shriram Group and SGI’s high-quality management team to achieve their vision of serving their customers, and look forward to sharing our experience to take the company to new heights,” said Gaurav Trehan, Partner and CEO of KKR India.
KKR is investing out of its fourth Asian fund currently which closed at $15 billion in April last year. The global investment firm offers alternative asset management as well as capital markets and insurance solutions.
Since setting up its Mumbai office in 2009, KKR has made more than 20 investments in India with more than a dozen active portfolio companies today.
The PE firm has also significant investments in India’s financial services space. Some of these investments include Housing Development Finance Corporation (HDFC), largest private sector housing finance company; SBI Life Insurance, a joint venture between the State Bank of India and BNP Paribas Cardif; Max Life, among India’s largest private life insurance players, through Max Financial Services, and Five Star Business Finance, a leading lender to small businesses.
In March 2021, KKR led a consortium to invest $234 billion in Five Star Finance that valued the IPO-bound non-banking finance company (NBFC) at $1.4 billion.
Note: The copy has been updated to include the financial details of the transaction.