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Bajaj Finserv Ltd

| Q2 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤11th Nov 25

Summary : Bajaj Finserv delivered strong Q2 FY26 results driven by robust growth across lending and insurance, with strategic initiatives and GST reforms positioning it for future profitable expansion despite temporary headwinds.

Management Perspective positive : Management expressed happiness about receiving acquisition approvals, reported 'healthy' and 'strong' growth across subsidiaries, and stated confidence in managing GST impacts and achieving future profitability targets. They also noted being 'well poised to weather any external adversity'.

Concall Report Analysis & Insights

Business Overview

  1. Consolidated total income grew 11% to INR 37,400 crores in Q2 FY26.
  2. Consolidated profit after tax increased 8% to INR 2,244 crores, or 12% excluding MTM impact.
  3. Bajaj General Insurance's gross written premium (GDPI) grew 9% (13.6% ex-1/n impact), outperforming market.
  4. Bajaj Life Insurance reported 50% VNB growth and 17.1% new business margins, highest ever.
  5. Bajaj Finance and Bajaj Housing Finance both achieved 24% AUM growth and healthy PAT increases.

Future Growth Prospects

  1. Allianz stake acquisition is nearing conclusion, simplifying the insurance company structure.
  2. Bajaj Life expects a positive growth trajectory post-Q2 FY26, supported by product mix and cost optimization.
  3. GST exemption on retail life and health insurance premiums is a medium to long-term industry tailwind.
  4. Bajaj Finserv Health aims to break even by FY28, focusing on transaction volume and new services.
  5. Continued focus on profitable growth, market share, and best-in-class customer service across all entities.

Management Insights

  1. Management affirmed commitment to profitable growth, sustainable value, and policyholder interests.
  2. Bajaj Life's 'BALIC 2.0' strategy is on track, focusing on sustainable growth and margin expansion.
  3. Acknowledged the GST impact on insurance but expressed confidence in mitigating it over the next two quarters.
  4. Highlighted Bajaj General's consistent outperformance of the industry in combined ratio and customer base growth.
  5. Emphasized building a differentiated health platform and driving volume for operating leverage.

Signs of Skepticism

  1. Analysts questioned the sustainability of Bajaj General's combined ratio remaining above 100%.
  2. Queries arose regarding the full mitigation plan for GST ITC losses and its impact on future margins.
  3. Uncertainty about the exact timeline for Bajaj Finserv Health to achieve profitability (FY27 vs FY28).
  4. Questions about whether the strong retail protection growth is solely due to initial GST reduction.

Risk Factors

  1. Higher acquisition costs impacted Bajaj General Insurance's underwriting losses in the quarter.
  2. Bajaj Life's PAT was significantly impacted by INR 112 crores due to GST changes and input tax credit loss.
  3. Bajaj Finance experienced elevated credit costs, particularly in 2 & 3-wheeler and MSME segments.
  4. Intense price competition persists in the general insurance market, affecting profitability.
  5. Transient GST impact on margins is expected for the next two quarters, requiring mitigation efforts.

Good To Know

  1. Approvals for Allianz stake acquisition and company name changes have been received.
  2. Bajaj Finserv Health expanded its provider network to 133,000 doctors and 16,000 hospitals.
  3. Bajaj Markets experienced planned de-growth due to system migration to SFDC for CRM.
  4. Bajaj Finserv AMC is the fastest to cross INR 30,000 crores AUM in less than two years.
  5. The company has not infused capital into Bajaj Markets since March '22, demonstrating capital efficiency.

Key Drivers

  1. Allianz stake acquisition completion.
  2. Bajaj Life's improved profitability.
  3. GST exemption for insurance.
  4. Expansion of health ecosystem.

Key Analyst Discussions

Competitive Environment

  1. Bajaj General aims to increase its 2-wheeler TP market share to align with OD market share.
  2. Group Health and Retail Health growth is selective, only picking up risk at appropriate pricing.
  3. Bajaj General consistently outperforms industry combined ratio by 15-20 percentage points.

Market Trends & Consumer Behavior

  1. Retail protection growth (70% YoY) is consistent over 18-24 months, not just a recent blip.
  2. GST exemption is a tailwind making insurance more affordable and accessible to customers.

Financial Highlights

  1. GST impact on Bajaj Life's NBM was 140 bps (50 bps back book, 90 bps new business).
  2. Management is mitigating GST ITC losses through product mix, cost optimization, and distribution discussions.
  3. Bajaj Life expects consistent margin expansion, with transient GST impact for two quarters.
  4. Bajaj General's combined ratio above 100% is due to upfront acquisition costs and 1/n accounting.
  5. Motor OD loss ratio increase is a quarterly blip from OEM charge hikes, with corrective actions underway.

Product Composition

  1. Bajaj Life's product mix shift towards protection, non-par, and annuity is sustainable in the medium term.
  2. Cost optimization contributes 100-125 bps to margin expansion, product mix 400 bps.

Strategic Considerations

  1. No immediate plans to list insurance companies; focus is on acquisition completion and brand establishment.
  2. Bajaj Finserv Health aims for break-even by FY28, prioritizing transaction volume and use cases.
  3. Insurance companies already pay dividends; review of capital utilization post-Allianz transaction.