South Africa’s financial services major Sanlam is consolidating its holding in financial services group SMC. This includes Sanlam Investments (the group’s investment arm) increasing its stake in the group flagship SMC Global Securities to 8.25 per cent and exiting its joint ventures in wealth management and asset management with SMC Group through a buyback.
The development comes as Sanlam is looking to investment more in the Chennai-based Shriram Group, with which it has partnered for life and non-life insurance ventures in the country. “A number of strategic ventures are currently being pursued. This includes discussions with our Indian partners on a possible additional investment in the financial services businesses of the Shriram Group,” Sanlam has said in a recent filing dated June 8.
According to earlier reports this year, Sanlam is looking to take a 20 per cent stake in Shriram Capital, the Shriram group’s holding company for all its financial services businesses.
Sanlam, which has global assets under management and administration of $50.7 billion, had entered into a deal with SMC in 2008 to pick up around 5 per cent stake.
In the fresh transaction, Sanlam is picking up another 3.25 per cent stake in SMC Global for Rs 41 crore ($9.1 million), valuing the broking major at over Rs 1260 crore ($280 million). SMC will also buy back Sanlam’s 50 per cent stake in wealth management venture for Rs 30 crore ($6.7 million) and 61 per cent in asset management unit for Rs 22.6 crore ($5 million). Both these transactions have been done at Sanlam’s original investment cost.
While Sanlam’s original deal valued SMC Global at Rs 3100 crore ($670 million), the current valuation is reflective of the pressure due to shrinking profitability in the industry.
SMC Global is backed by NASDAQ-listed blank cheque firm Millennium India Acquisition Company, whose shareholding after this transaction is expected to go down to 14.03 per cent from 15.14 per cent. Bennett, Coleman & Company Ltd (BCCL), which owns newspapers like The Times of India and The Economic Times, also holds a stake in SMC group.
Privately held SMC Group is into financial services business, offering brokerage, research, equity, commodity and derivative trading, besides other related activities.
SMC’s chairman and managing director S.C. Aggarwal said in a statement that while the asset management venture had still not received all the regulatory approvals, the two parties decided that the wealth management business should be taken forward “relying on the natural strengths of the local partner.”
"With regard to the asset management business, as we have still not received all necessary regulatory approvals required to commence the venture and also given the challenging global business environment, we have mutually determined that the best course would be to free up the capital invested by both partners and rather focus on more immediate growth opportunities,” said Aggarwal.