The Ajay Piramal-led group holds about 15% in Shriram General Insurance Co. Ltd and about 13.3% in Shriram Life Insurance Co. Ltd. The group has appointed Avendus Capital and Arpwood Capital as investment bankers to find buyers for its life and general insurance stakes respectively, the people cited above said on the condition of anonymity.
Piramal had acquired stakes in various Shriram companies more than a decade ago, after selling its pharmaceuticals business to Abbott Laboratories in 2010. In recent years, it has sold some of these stakes at a profit, and invested in other businesses like lending.
“Piramal’s investments in both life and general businesses of Shriram have appreciated, and it is keen to exit since the focus of the Piramal Group is changing. The two bunches of stakes in Shriram are likely to be sold separately. There are several private equity and strategic entities which have shown interest in buying the stakes,” one of the two people cited above said on the condition of anonymity.
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Shriram Life Insurance earned a new business premium of ₹1,755 crore in FY25 till January, which is 24% higher year-on-year, while Shriram General Insurance underwrote a gross premium of ₹3,020 crore in the same period, also up 24%, data from the insurance regulator showed.
Spokespersons of Piramal Group and Shriram Group declined to comment, while emails sent to Avendus and Arpwood remained unanswered.
“Considering the premium a buyer has to pay for purchasing bulk stakes, the general insurance stake sale could be worth ₹3,000-4,000 crore, while the life insurance stake may be sold for about ₹1,000 crore, said the first person. “If one considers the FY24 end numbers, the valuation of Shriram Life could be ₹6,000-10,000 crore and the value of the general insurance company of Shriram Group could be ₹18,000-25,000 crore,” the person added.
Both insurance companies are Shriram Capital’s joint ventures with South Africa’s Sanlam Group. Last year, Sanlam increased its stakes in both firms beyond 50%, by purchasing shares from TPG India Investments and Shriram Ownership Trust.
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“Piramal Enterprises is consolidating its financial services business by merging with its housing finance arm Piramal Capital and Housing Finance Ltd, and rebranding the merged entity as Piramal Finance Ltd, simplifying the group structure and providing shareholders with direct access to the entire lending business. This strategic move is also aimed at eliminating cost duplication, enhancing operational efficiency, and improving customer experience,” said the second person.
The two persons said through this consolidation, the group plans to capitalize on the country’s thriving affordable housing business.
In May 2024, Piramal Alternatives Trust, the fund management division of the Piramal Group, announced an investment of ₹600 crore in a microfinance NBFC Annapurna Finance Pvt. Ltd.
“The exit from Shriram is a part of PEL’s plan to sell non-core assets. The sale proceeds will strengthen its balance sheet and provide funds for future growth opportunities,” said this person.
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Apart from the focus on lending, there is another reason as well.
The promoter of an insurance company with a 50% stake can hold only up to 10% stake in another insurance company, only under special conditions or with regulatory exemption. Piramal already holds 50% in Pramerica Life Insurance Ltd, and more than 10% in the Shriram ventures.
Selling stake in the life insurance firm will bring the group in line with regulatory norms, while the general insurance stake sale is purely a part of the strategy to sell off non-core assets and use the funds for investment in the lending business, the second person added.
Piramal sold its pharmaceuticals business to Abbott for about ₹17,000 crore in 2010 and invested part of the amount in key Shriram group firms. It bought 9.96% stake in Shriram Transport Finance Co. Ltd in May 2013 from the open market for ₹1,636 crore. Then in 2014, Piramal Enterprises had acquired an effective 20% equity stake in Shriram Capital Ltd for ₹2,014 crore.
In 2019 PEL sold its entire stake in asset financing firm Shriram Transport Finance Co. for ₹2,305 crore. In June 2024, Piramal sold its 8.3% stake in Shriram Finance for ₹4,824 crore in the open market.
In parallel, the Pirmal group is restructuring its core business.
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In May, listed Piramal Enterprises decided to merge with unlisted PCHFL, which would spare the latter from the requirement of a public share sale under the central bank’s rules for so-called upper-layer NBFCs. Selling off the insurance business stake will improve Piramal Enterprises’ balance sheet before the merger, the second person added.
