Shriram Group and Sanlam to invest about ₹200 cr in their new 50:50 wealth management joint venture

Subhasri Sriram (SS): So, they (Sanlam) are a 100-year old institution, we (Shriram Group) are a 50- year-old institution. Both have been partners for 20-plus years in financial services. So, it’s not a partnership made for a very opportunistic transaction. It is not a partnership made by institutions who are taking advantage of the market conditions….In our existing businesses, neither one of us is looking to monetise our investments. We are putting in fresh capital in the new business. The capital requirement varies depending on what the business requirement is. But, I think, we will start with at least ₹200 crore.

SS: For Shriram-Sanlam this is a natural progression. Having done credit, having built the base (as NBFC) in the deposit market, having built insurance businesses (life and non-life) of scale (nevertheless we know there is a lot more room to grow in these businesses)…the next natural step is to get into wealth management.

Two years ago we reactivated our asset management business. We just got a PMS (portfolio management service) license. We have the insurance product. And we have a broking company as well. So, we have the entire suite of products.

Our other businesses are in a very good position and require very little intervention from either one of us. So, it’s a good time for us to invest our energy, time and management bandwidth into new businesses.

SS: We are not defining a customer based on his net worth. So, we are not putting a price tag to a customer saying that if you only have this amount, you are eligible to come to us….This is a business for all. That also means that we could deal with a customer with ₹50 lakh, we could deal with a customer with ₹500 crore. But 50 lakh is not our threshold. So, there is no threshold. So, I have just used ₹50 lakh as an example. So again, I am being mindful of it….Our target is to onboard as many customers as possible. Therefore, the Indian population, with investible surplus, is our target customer. Our objective is to give solutions which are suited and appropriate for the customer. We will have one of the advantages of late mover.

I think, from an organiation point of view, the partners — Shriram and Sanlam together, are clear that we are building an institution for the next 20-30 years. So, we are not working on a valuation game that our AUM has to be X, and therefore the business gets valued as Y and X delta. That’s not something we are working on. Definitely the metrics which we will want to track is the number of customers we are onboarding rather than just the AUM. Well, the revenue driver is the AUM, but we believe the long-term customers will make a lot more difference to us. And we believe, the way India is now positioned, any new customer, anyone who is coming onboard,…our (AUM) is only going to go up in a sequential manner. And adding more customers into our fold would be our priority.

Paul Hanratty (PH): So look, we think that the wealth management industry everywhere in the world is kind of the last step in the progression of people’s financial wealth. You know, the first thing you need is some sort of transactional facility and then as you get wealthier, eventually comes the need for or maybe the luxury, you could say, of providing for your future and your family and future generations’ future.

So, we think this is a natural evolution for both India and Shriram. And Subhasri came to us about two years ago and said look, customers are beginning to have a need and a demand in this area. We’ve seen this happen in our markets many years ago and we’ve built a very big wealth business

If I say to you, “Do you have enough? Surely you’ve got enough now. Why do you need more? Nobody’s ever got enough wealth, right? And capital grows itself as well. So, typically, even in mature markets, these tend to be high growth industries.

If you look at the multiples on wealth businesses as opposed to asset management businesses, the former has high multiples. Why? Because they grow. And money is very sticky. Why is it sticky? Because it’s about the relationship.

PH: So, I think, you know, our value set at Sanlam, and I think it’s echoed by Shriram Group, is we’re there to do a good job over a long period of time for ordinary people. They may end up being wealthy people, but they’re still, at their hearts, hardworking, disciplined, ordinary people. And so, therefore, we have to deliver value for money.

So, I think that will be our aim. It will not be to a get rich quick push….private banks are very focused on transaction and short-term profit. In the wealth business, you must be very focused on long-term profit, and you want your customer to be successful. If he’s successful or she’s successful, you’ll be successful. It’s not a short-term business. It requires a long-term investment in relationship, holding the customer’s hand. And if you can hold the customer’s hand properly and diligently, they will get the return of the index, at least.