Sanlam Kenya shareholders approve $25.1 million rights issue to boost capital

Timilehin Adejumobi -
Key Points
  • Sanlam Kenya secures shareholder approval for $25.1-million rights issue to reduce debt, enhance liquidity, and fuel sustainable growth.
  • The rights issue will help prepay a loan from Stanbic Bank Kenya, improving working capital and reducing interest expenses.
  • Shareholders also approved an increase in authorized share capital to $28.75 million with a fully underwritten rights offering.

Sanlam Kenya, a Nairobi-based insurer partly owned by Kenyan industrialist Baloobhai Patel, has secured shareholder approval for a Ksh3.25 billion ($25.1 million) rights issue. This capital raise is designed to recapitalize the company, reduce debt, and enhance liquidity, positioning the insurer for sustainable growth while addressing immediate financial challenges.

The decision, made during a recent shareholders’ meeting, will enable Sanlam Kenya to prepay a loan from Stanbic Bank Kenya, reducing interest expenses and strengthening working capital. This move aligns with the company’s broader strategy to improve its financial standing and long-term stability.

Strategic capital raise to fuel growth and operational flexibility

Chairman John Simba underscored the rights issue’s importance, stating, “The funds will provide operational flexibility and empower us to drive profitability and growth.”

Additionally, shareholders approved an increase in the company’s authorized share capital from Ksh2 billion ($15.46 million) to Ksh3.72 billion ($28.75 million). The plan includes issuing up to 1 billion new ordinary shares at a nominal value of Ksh5 ($0.04) per share, fully underwritten by Sanlam Allianz Africa Proprietary, ensuring the offering’s completion.

Group CEO Nyamemba Tumbo called the initiative transformative, noting its potential to reduce debt, lower interest obligations, and strengthen the company’s balance sheet. “A stronger balance sheet will enable us to expand our footprint in non-banking financial services and advance our mission of fostering inclusive financial confidence,” Tumbo added.

Sanlam Kenya's revamp plan

Sanlam Kenya, supported by its parent company's extensive network, remains dedicated to its African expansion strategy but may reconsider its approach in markets like Kenya to optimize growth opportunities.

The insurer's shares on the Nairobi Securities Exchange (NSE) have experienced a notable decline over the past five years, significantly affecting its market capitalization, which is currently under $5 million.

This rights issue follows years of strategic restructuring, including asset divestments and a sharper focus on core insurance operations. In its 2023 annual report, the company outlined plans to close three subsidiaries by August 31, 2024, as part of a broader strategy to curb financial losses and return to profitability.

Baloobhai Patel's broad Kenyan investment portfolio

Baloobhai Patel, a top figure in Kenya's business landscape with substantial investments in diverse sectors, holds a 21 percent stake in Sanlam Kenya through his investment vehicle, Aksaya Investment.

Patel's portfolio also includes significant stakes in well-established Kenyan companies such as Bamburi Cement, Absa Kenya, Williamson Tea Kenya, Diamond Trust Bank Group, and Safaricom, solidifying his influential position within the country's economy.