Kenyan tycoon Baloobhai Patel-linked Sanlam Kenya to close subsidiaries amid financial woes
Key Points:
- Sanlam Kenya plans to close three subsidiaries by August 31, 2024, aiming to reverse financial losses and enhance profitability.
- Despite profitable core operations in 2023, Sanlam Kenya faces significant challenges, including a $1 million net loss and a prolonged dividend drought since 2013.
- Sanlam Kenya remains committed to growth amid efforts to optimize strategies in challenging economic landscapes.
Sanlam Kenya, a Nairobi-based insurer partly owned by Kenyan industrialist Baloobhai Patel, is set to wind up three of its subsidiaries by August 31, 2024, as part of a strategic effort to reverse its financial downturn.
The decision, disclosed in the company’s 2023 annual report, underscores the insurer’s bid to tackle persistent losses and bolster profitability.
Strategic move amid financial challenges
The affected subsidiaries include Sanlam Investments Ltd, engaged in asset management, ChemiCemi Mineral Water Company, a bottled water entity, and Mae Properties, specializing in property management. These entities have remained dormant amidst mounting financial pressures faced by Sanlam Kenya.
Nairobi-based insurer takes bold step to stabilize operations
Financial records reveal Sanlam Kenya has grappled with consecutive annual losses since 2019, culminating in a staggering net loss of Ksh127 million ($1 million) in 2023 alone—a 53 percent surge from the previous year. This prolonged financial strain has led to a dividend drought for shareholders since 2013, highlighting the severity of the insurer’s fiscal challenges.
To mitigate these difficulties, Sanlam Kenya has resorted to borrowing, accumulating total loans amounting to Ksh4.65 billion ($36.2 million). The insurer recently secured a Ksh1.08 billion ($8.41 million) loan from its parent company, Sanlam, illustrating its reliance on external financial support.
Despite these setbacks, Sanlam Kenya’s core insurance operations managed to generate profits in 2023, albeit insufficient to offset overall losses. The decision to wind down the dormant subsidiaries forms part of a broader strategy aimed at stabilizing operations and restoring shareholder value amidst a volatile economic landscape.
Impact on shareholders and strategic outlook
Sanlam Kenya, backed by its parent company’s expansive network, remains committed to its African expansion strategy, although it may reassess its approach in markets like Kenya to optimize growth prospects. The insurer’s shares on the NSE have plummeted significantly over the past five years, impacting its market capitalization, which currently stands below $7 million.
Baloobhai Patel, a key figure in Kenya’s business community with substantial investments across various sectors, holds a 21-percent stake in Sanlam Kenya through his investment vehicle, Aksaya Investment. Patel’s diverse portfolio includes stakes in prominent Kenyan entities such as Bamburi Cement, Absa Kenya, Williamson Tea Kenya, Diamond Trust Bank Group, and Safaricom, underlining his influential role in the country’s economic landscape.
Sanlam Kenya’s decision to streamline its operations by closing inactive subsidiaries marks a critical juncture in its quest for financial stability, signaling its determination to navigate challenging market conditions and revitalize investor confidence.