Piramal Enterprises, the financial services and pharma company, plans to sell its stakes in Shriram Group’s insurance ventures as it focuses on its core business and strengthens its balance sheet.
The Ajay Piramal-led group intends to sell a 15% stake in Shriram General Insurance Company and around 13.3% in Shriram Life Insurance Company for an estimated Rs 4,000 to Rs 5,000 crore, reported Mint. Avendus Capital and Arpwood Capital have been appointed as investment bankers to find buyers for the stakes.
Piramal Group, with a presence in financial services, pharma, and real estate, began acquiring stakes in the Shriram Group following the sale of its pharmaceutical business to Abbott Laboratories in 2010. In May 2013, Piramal invested Rs 1,636 crore for a 9.9% stake in Shriram Transport Finance Company Limited. The next year, in April 2014, it purchased a 20% stake in Shriram Capital Limited for Rs 2,014 crore.
What’s Behind the Piramal Group's Exit?
Over the years, Piramal gradually reduced its holdings in various Shriram Group entities. In June 2023, it sold its entire 8.34% stake in Shriram Finance Limited through block deals, amounting to approximately Rs 4,824 crore.
Subsequently, in January 2024, Piramal Group announced divestment of its entire 20% stake in Shriram Investment Holdings Private Limited to the Shriram Ownership Trust for Rs 1,440 crore. Later, a Business World (BW) report noted that Shriram Group plans to raise as much as Rs 2,400 crore in debt to acquire Piramal Enterprises' stake in Shriram Investment Holdings and other entities. The debt, in the form of loans against Shriram Finance's shares, is being finalised with details on pricing and tenor still pending.
According to the Mint report, the stakes in General Insurance Company and Life Insurance Company are likely to be sold separately, with several private equity and strategic entities showing interest. The sale could fetch Rs 3,000-Rs 4,000 crore for the general insurance stake and Rs 1,000 crore for the life insurance stake.
Shriram’s life and general insurance businesses are valued at Rs 6,000-Rs 10,000 crore and Rs 18,000-Rs 25,000 crore, respectively.
Piramal Group is reportedly selling its stakes in Shriram's life and general insurance ventures to comply with regulatory norms and focus on core businesses. As Piramal already holds a 50% stake in Pramerica Life Insurance. So in line with Indian regulatory norms it must reduce its stake in Shriram Life Insurance to 10% or less. The group also plans to use the sale proceeds to strengthen its balance sheet and invest in growth opportunities, particularly in the affordable housing sector.
