Bajaj Finserv Limited — Q3 FY25 earnings call

Call held 31 Jan 2025

Management summary

Bajaj Finserv delivered a satisfactory Q3 FY25, marked by robust growth in its lending and general insurance businesses. The life insurance arm underwent a strategic recalibration of its product mix and distribution channels, impacting near-term growth but aiming for sustainable profitability. The company's platform businesses, including Bajaj Markets, showed significant progress towards profitability.

Highlights

  • Consolidated total income grew 10% YoY to INR32,042 crores.

  • Consolidated PAT increased 3% YoY to INR2,231 crores.

  • PAT (excluding unrealized mark-to-market) surged 23% for the quarter.

  • Bajaj Allianz General Insurance (BAGIC) Gross Written Premium (GWP) rose 46% YoY to INR6,626 crores, with PAT up 39% to INR400 crores.

  • Bajaj Allianz Life Insurance (BALIC) GWP grew 16% to INR6,361 crores, and PAT increased 106% to INR222 crores.

  • Bajaj Finance Limited (BFL) reported 26% YoY growth in consolidated net income to INR11,673 crores and 18% PAT growth to INR4,300 crores.

  • Bajaj Housing Finance saw 25% profit growth and 26% AUM growth.

  • Bajaj Markets reduced its loss to just INR3 crores, with clear visibility on cash breakeven.

Key financials

  1. Consolidated Total Income ₹32,042 Cr +10%YoY
  2. Consolidated PAT ₹2,231 Cr +3%YoY
  3. Consolidated PAT (excl. MTM) — +23%YoY
  4. BFL Consolidated Net Income ₹11,673 Cr +26%YoY
  5. BFL Consolidated PAT ₹4,300 Cr +18%YoY

What they filed

Q1 FY27: revenue up 19.1%, net profit up 18.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue33,704 32,042 36,595 35,288 37,403 +11%39,708 +24%38,494 +5%42,037 +19%
EBITDA12,283 12,373 12,728 14,315 14,050 +14%13,866 +12%14,511 +14%17,141 +20%
Net profit4,180 4,412 4,756 5,329 4,746 +14%4,368 −1%5,226 +10%6,297 +18%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Bajaj Allianz General Insurance (BAGIC)
    ₹6,626 Cr Gross Written Premium (GWP)— GWP (excl. crop/govt health)₹400 Cr PAT14% ROE101.1% Combined Ratio₹43 Cr Underwriting Loss₹577 Cr Investment & Other Income₹32,633 Cr AUM (Cash & Investments)
  • Bajaj Allianz Life Insurance (BALIC)
    ₹6,361 Cr Gross Written Premium (GWP)₹222 Cr PAT₹254 Cr New Business Value (NBV)₹5.56 lakh New Policies (9M FY25)₹264 Cr Retail Protection (9M FY25)— Renewal Premium₹1.22L Cr AUM
  • Bajaj Housing Finance
    — Profit Growth— AUM Growth27.9% Capital Adequacy Ratio (CAR)0.29% GNPA0.13% NNPA
  • Bajaj Finserv Health
    2.3 Mn Health Transactions (Q3 FY25)
  • Bajaj Markets
    ₹3 Cr Loss8.2 Mn Customers Attracted₹2,000 Cr Disbursement
  • Bajaj Finserv Asset Management
    ₹17,433 Cr AUM₹818 Cr AUM from launched funds86% Non-group share of AUM

Capital allocation

high confidence
  • Liquidity Liquidity disclosed Both Bajaj Allianz General Insurance and Bajaj Allianz Life Insurance companies maintain solvency in excess of 300%. Bajaj Housing Finance has a strong Capital Adequacy Ratio (CAR) of 27.86% post IPO.
    Overall, while there have been pressures on top line, it is the start of a multiyear journey of improved profitability for BALIC. Again, both the insurance companies are among the most solvent in the industry with solvency in excess of 300% for both. (Page 7); And the capital adequacy ratio is very strong post the IPO at 27.86% (Page 7)

Guidance & targets

Profitability

  • BALIC VNB Growth Profitability · future · Medium confidence faster than top line growth
    Rather VNB would start growing faster than what you see in top line growth because that is the way we have planned our product structures and not just a mix mind, its due to structures, which is a significant overhaul.

    — Tarun Chugh

  • Bajaj Markets Loss Profitability · near term · High confidence cash breakeven
    The major achievement for BFS Direct in this quarter, a marketplace business is that the loss for the quarter is just INR3 crores, and we are seeing a very clear visibility on cash breakeven for the marketplace business of Bajaj Finserv Markets.

    — S Sreenivasan

Margin

  • BALIC Margin Margin · future · Medium confidence going up higher
    There's been a slight increase in margin versus last year. But you will see us going up higher because of the lower base.

    — Tarun Chugh

Growth

  • BALIC Overall Growth Growth · future · Medium confidence faster than rest of industry
    We've always maintained a stand that we'll be growing far faster than the rest industry. And you'll see that happening. It's a temporary blip.

    — Tarun Chugh

  • Commercial Lines Price Hike (Industry) Growth · ongoing · High confidence 10-15%
    So the first point is you will see about a growth of 10% to 15% in terms of the hike happening in commercial lines of businesses on account of price hike, weighted average, the point you said.

    — Tapan Singhel

What to watch in Q4 FY25

BALIC Agency Channel Growth

next quarter
Current Still taking time to settle into new product mix and growth trajectory
Target Starts coming back to earlier growth trajectory

Why it matters

The agency channel is a significant part of BALIC's distribution, and its recovery is key to overall growth post-restructuring.

Agency, though, is still going to take some more time to settle into the new product mix and may take a few quarters before it starts coming back to its earlier growth trajectory. (Page 10); So maybe a quarter more may take before agency can start coming in. (Page 22)

Risks & concerns

  • Allianz exit from insurance joint ventures

    medium

    Allianz is considering an exit; discussions are preliminary and not finalized. No significant additional information available yet.

    Management acknowledged

  • Muted growth in BALIC due to strategic recalibration

    medium

    BALIC's individual rated new business premium growth was muted due to changes in product mix and distribution arrangements, and new surrender regulations. This is a deliberate pause for profitability.

    Management acknowledged

  • High Expense of Management (EoM) for smaller general insurance players

    medium

    While Bajaj Allianz operates well below the 30% EoM limit, smaller companies with higher EoM will need to correct their strategies, posing a challenge for the industry.

    Analyst acknowledged

  • Volatile crop and government health business impacting BAGIC's GWP

    low

    Excluding the volatile crop and government health segments, BAGIC's GWP growth was 6%, indicating underlying business health despite overall volatility.

    Management acknowledged

  • Impact of IRDAI regulation capping health price hikes for senior citizens

    low

    Management welcomes the regulation, viewing it as beneficial for societal needs and promoting balanced pricing across the portfolio, not a negative for Bajaj Allianz.

    Analyst acknowledged

Q&A highlights

4 direct
BALIC product mix strategy post surrender regulations Direct
We've gone ahead and changed practically all our products, including ULIP, par and non-par. As a result, what we've started doing in ULIPs is that a significant percentage of our ULIPs now are with built-in riders and higher protection.

Management detailed a comprehensive overhaul of BALIC's product portfolio, shifting focus to higher-margin ULIPs with riders, which is a significant strategic change.

Asked by Mahek

BALIC growth trajectory and product mix Partial
This quarter, while the changes were happening, we purposely took a pause and relooked at our entire product structures. With this change happening, it was obvious that the focus now is on profitability and profitable growth.

Management explained the muted growth in BALIC as a deliberate pause for strategic restructuring towards profitability, indicating a temporary slowdown rather than a long-term issue.

Asked by Madhukar Ladha

Impact of surrender value guidelines on BALIC Partial
If you look at what we've -- in Q3, in fact, our entire margin has gone up slightly, but yes effect is there and particularly, we're seeing it in December.

Management acknowledged the impact of surrender value guidelines, noting a slight margin increase but also an effect seen in December, providing color on a key regulatory change.

Asked by Nischint

BAGIC market share gain despite strengths and float growth Direct
First, if you look at BAGIC, it's in a top three company of India and organically grown. It has not acquired any company or done any merger acquisitions. In spite of that, it's organically grown. It has moved up organically in 23 years' time, brick by brick to become a top three company, first point.

Management defended BAGIC's market position, highlighting its organic growth to a top-three player and consistent outperformance on combined ratio, despite not showing rapid market share gains in all segments.

Asked by Nidhesh Jain

BAGIC motor TP loss ratios and OD vs TP growth divergence Direct
So you will keep on seeing shifts happening. In some places, we'll gain market share, some we will let go. Then at the right time, we'll again gain market share again, some we'll let go. It is an orchestra. It is not that it is always consistent.

Management used an 'orchestra' analogy to explain segment-wise growth variations, implying a dynamic strategy of balancing profitability and market share across different product lines rather than uniform growth.

Asked by Sanketh Godha

Credit life business outlook Direct
As far as credit life is concerned, yes, you're right. And if you can foresee the future and you're saying it's bottoming out, yes, then, of course, we'll be back. Everybody will be back in the sector.

Management confirmed that the credit life business is 'bottoming out' and expects a sector-wide recovery, signaling a potential positive inflection point for this segment.

Asked by Sanketh Godha

3 min read 7 chapters

Detailed narrative

Consolidated Performance Overview and Profitability Drivers

Bajaj Finserv reported a 10% YoY increase in consolidated total income to INR32,042 crores for Q3 FY25, with consolidated PAT growing 3% to INR2,231 crores. Notably, PAT excluding unrealized mark-to-market gains and losses, and including realized equity gains, showed a stronger 23% growth for the quarter. This indicates a healthy core operating performance despite some accounting adjustments related to fair value through profit and loss for equity securities in insurance subsidiaries.

General Insurance (BAGIC) Strong Growth and Profitability

Bajaj Allianz General Insurance (BAGIC) demonstrated robust performance, with Gross Written Premium (GWP) surging 46% YoY to INR6,626 crores. Excluding volatile crop and government health businesses, GWP grew 6%. PAT increased 39% to INR400 crores, and ROE stood at 14%. The combined ratio improved to 101.1% from 102.9% in Q3 FY24, reflecting satisfactory underwriting performance and a significant reduction in underwriting loss to INR43 crores from INR85 crores.

Life Insurance (BALIC) Strategic Recalibration for Profitability

Bajaj Allianz Life Insurance (BALIC) experienced muted individual rated new business premium growth due to a deliberate strategic recalibration of its product mix and distribution channels, focusing on profitability. Despite this, GWP grew 16% to INR6,361 crores, and PAT saw a significant 106% increase to INR222 crores, aided by a tax reversal of approximately INR67 crores. The company is shifting towards higher-margin ULIPs with built-in riders and protection, and renewal premium growth remained strong at 24%.

Lending Businesses (BFL & Bajaj Housing Finance) Continued Strong Performance

Bajaj Finance Limited (BFL) delivered a very good quarter, with consolidated net income up 26% to INR11,673 crores and consolidated PAT up 18% to INR4,300 crores, maintaining a steady ROA of around 4.5%. BFL recorded its highest-ever new loans of 12 million and added 5.03 million new customers. Bajaj Housing Finance also showed solid results, with profit growth of 25% and AUM growth of 26%, supported by a strong capital adequacy ratio of 27.86% post-IPO and low NPAs (GNPA 0.29%, NNPA 0.13%).

Platform Businesses Progress Towards Breakeven

Bajaj Finserv's platform businesses showed promising developments. Bajaj Finserv Health facilitated approximately 2.3 million health transactions in Q3 FY25, with a growing focus on the payer network. Bajaj Markets attracted 8.2 million customers and reduced its quarterly loss to just INR3 crores, with management expressing clear visibility on cash breakeven. Bajaj Finserv Asset Management's AUM grew 8% from September 2024 to INR17,433 crores, with non-group share of AUM increasing to 86%.

Regulatory and Industry Landscape Commentary

Management addressed the IRDAI regulation capping health price hikes for senior citizens at 10%, welcoming it as a measure to ensure societal needs are met and to encourage industry collaboration with hospitals on standardized rates. They also noted that the general insurance industry is seeing price increases of 10-15% in commercial lines, which is positive. The impact of new surrender regulations on the life insurance sector was acknowledged as a temporary headwind, particularly affecting agency channels.

Management Transitions and Organizational Agility

The call highlighted significant management transitions, with Mr. S Sreenivasan handing over the CFO position to Mr. Ramandeep Singh Sahni, who will also continue in a leadership role as President Insurance and Special Projects. Mr. Anckur Kanwar is taking over as CFO of Bajaj Allianz General Insurance. These changes reflect the company's focus on nurturing talent and building an agile organization capable of adapting to evolving market and regulatory dynamics.

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