Bajaj Finserv Ltd Q2 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Mahek Shah - Emkay Global - Analyst : So my question was on BALIC. So -- so I just wanted to understand the breakup of this 140 bp impact on NBM margin, which is on account of the GST. So if you could just help us with the breakup between the renewal and the business done after 22nd September. That was one. And secondly, how do you look to kind of mitigate the impact of GST ITC losses? Will you kind of revise these distributor commissions or how do you plan to mitigate this impact? These are the 2 questions. Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd On quantitative bid for -- Vipin to handle, and then maybe I'll come with a qualitative one.

Question: Mahek Shah - Emkay Global - Analyst : Yes. Perfect. And secondly, on how would you look to mitigate this volume that? Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd Yes. So this is in the works, some actions we've already taken on. And I must say that quite successfully. A lot of this has been in terms of product structures and product mixes. And that is something we shall keep working on for the next 2 quarters. We are also in discussion with distribution on how to take this burden of GST, which overall, I think, other than the ITC part, the rest of the GST has already helped in growth. And the tailwinds are sitting in, it's quite obvious that customers are seeing prices are down. So we are now working with distribution and not just us but the sector together on how we can share this ITC burden with our distributors, our vendors and, of course, how we can ourselves bury down. We expect another 2 quarters for settling this entire process and taking all measures that we are intending to take. I guess by the end of that, we should be firmly placed. .

Question: Sanketh Godha - Spark Capital Advisors (India) Pvt Ltd - Analyst : Sir, if I get the impact of, say, 140 bps of the NBM, then you almost reported maybe closer to 16% margin -- more than 16% margin for 1H FY26 compared to 9.2% what you reported last year. So in the presentation, you mentioned that it is product mix, cost rationalization and better product margins. So if I want to break down this 7 percentage delta improvement in the margin, how much -- if you can give a bit of LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call color how much was led by product mix, cost optimization and maybe better margin profile of the products basically. Just to understand a bit more whether this is sustainable or not? That's my first question. And second, on BALIC, largely on -- you will enter into a favorable base now from second half. So can we expect growth to come back in teams for you in second half or the disruptions with respect to GST, renegotiating commissions we will have its own bearing and therefore growth for the full year can be still pretty muted or might be a little difficult even in the second half. So these are the 2 questions I have on BALIC. Tapan Singhel - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz General Insurance Company Limited Yes. So Sanketh, let me pick up the -- broadly the map of the margin that you spoke about. So look, we have mentioned in the past, the cost optimization that we were doing that is giving us anything between 100 and 125 bps of margin expansion. So that's with respect to costs. If I had to give you a broad breakup on the mix, I think anything about 400 bps is coming out of the mix, rest is coming out of product repricing and then there will be obviously some compensating items because like everybody else, our credit protection business continues to see intensive competitive pricing pressure, and there we are seeing some margin compressions. So that's offsetting -- our volumes are a little low. So cost optimization is making an impact there. So probably if you were to ask me, cost would be about 100, 125 bps. Product mix would be about 400 bps. That's broadly -- I could talk to you about 500, 525 bps. I think the rest will be multiple line items there.

Question: Sanketh Godha - Spark Capital Advisors (India) Pvt Ltd - Analyst : Understood. Understood. I think on the growth, the second question, which I asked, given that you will have mix. Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd Yes. It's Tarun Chugh, Saket. Yes, you've got it right. The studied strategy that we had on a flattish 4 quarters is over, and that ended September. And here on, you should see a significant trajectory on growth. I would, at this point, not hazard a guess, but it would be above the industry, but I wouldn't be surprised if it is. And I think this is supported by the fact that the GST impact in terms of the tailwind that it's giving, will also be a significant part. We've already seen growth coming in the proprietary sales, in the bancassurance side, patency, of course, is some legs are still not steady, but bulk is under control. And we expect that, that is unfolding and that will be more visible now in this coming quarter. Base effect, notwithstanding. It will still be a favorably good quarter I assume in terms of the top line. So no worries on that count.

Question: Madhukar Ladha - Nuvama Wealth Management - Analyst : First, congratulations on a very strong result in BALIC, so we're seeing a very sharp increase in margins and GNP. And also, my question was more related towards the product mix. So I think you've been able to change the product mix very successfully towards a higher protection even on a quarter-on-quarter basis, PC protection has grown very strongly, and sort of nonpar and annuity also, which are the higher-margin segments, they are also seeing a good pickup. So I wanted to understand what is driving it? And how sustainable in your opinion is this growth in protection. So -- and obviously, I'm guessing there's also a tailwind on GST, some comments around it has continued in October? And how would you see this in the second half will be helpful for us to sort of judge what the margins can be for FY26 given the hit of ITCs also there, right? So yes, some comments around that would be helpful. Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd So I got bulk of the question, Madhukar, and I'll attempt to answer that. If you feel that I haven't answered appropriately, please append it. But yes, thanks for acknowledging the fact that we've been able to get the product mix quarter significantly. This is exactly what we told you a year back that the results have been a little better than what we expected, honestly, exactly as you are also kind of commenting. But more and more, we've seen that we've still got significant room to move on the protection side. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call And well, the story is still consistently there. For example, I'll just give you some -- I just saw some data points. 33% of our customers are getting onboarded as protection term customers. 17% of our customers additional to this are getting added on some rider or the other. So very clearly, 50% of the customer base has some element of protection easily in it. We did see an opportunity, and we did find an innovation opportunity on the annuity side, which was vacant, and we were the first ones to make the move. In fact, if I'm talking that on annuities to -- we were the first one with the deferred annuities a few years back. And now we'll be moving on the maybe short-term pay annuities and which has worked well, particularly in the 50 to 70 band. In addition to it, about 10% of our high commercial is about 8% to 10% of our entire mix as well. So the unit part has also moved. Part of the -- all of this was kind of mentioned to us and promise to all our stakeholders last year, and I think we've come a light on that. There is innovation more so in term as well, which we've done, which may be as let it succeed, we shall disclose, this is already showing the good green shoots that you see, and I'll claim move and I consistently got that experiment working on term, which is a different segment of approach. All this, I think, more to come as we go. I think we've been surprised and pleasantly surprised and are more bullish about direction in which term plans can go. And you should -- as you work on Excel sheet, your second leg of your question, yes, we will be holding this product mix broadly in the medium term. So again, we don't have any worries on this. As last year, we had moved to BALIC 2.0, there was significant steps we took, not just in product mix and product structures but also on cost optimization. So finally, that cost optimization to -- there is still room in that direction. And you will see that in the next 18 months, more and more of that happening. So yes, the direction is positive. Have I answered your question, Madhukar, you believe?

Question: Madhukar Ladha - Nuvama Wealth Management - Analyst : Less than that. Yes. Yes. Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd The GST impact, if any roles on sector will still get the benefit of that for the future. We've been working on our underwriting analytics. I had talked about our analytics a few times earlier, a profiling of customers, pre-profiling democratizing it more in business channels, and I do see some headroom even more available there. The way we work our term strategy, like we do any other strategy is ground-up segmented and not just want it all. I think that's been working. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call Our processes with AI at the back end, digitization has worked out quite well. And like I said, we'll talk about more of this as the experiments go ahead. I think Vipin wants to say something.

Question: Madhukar Ladha - Nuvama Wealth Management - Analyst : Great. Congratulations.

Question: Nidhesh Jain - Investec Bank PLC - Analyst : First question is on listing of life insurance and the line insurance business. Any plans to list these companies separately given that in the past, we have heard that there is a regulatory push also to this larger life insurance and insurance companies. And in the last deal also, your Promoter Group has taken a stake in these companies. So any plans to simplify the structure or list these companies in the medium term?

Question: Nidhesh Jain - Investec Bank PLC - Analyst : Sure. Sir, second question is on Bajaj General Insurance, in BAGIC, we have been -- in the past, we have been operating at below 100% combined. But in the last couple of years, the combined ratio has been consistently above 100%. So what are the reasons for that? And how do you see a possibility of combined ratio below 100% over medium term? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call Tapan Singhel - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz General Insurance Company Limited So the point to be seen here is if you look at the industry combined ratio, it has been over 150 between 150 and 20. So BAGIC has been beating the industry combined ratio by full 15 percentage points or percentage but a full 15 percentage point. and consistently for so many years. So even now when you see the data in mind Raman mentioned that his opening speech, 1/n also pushes it up by at least a 1% point, which is up there. And secondly, when you acquire businesses, which has acquisition costs being paid upfront, the accounting puts it like that. And that's why Sreeni was alluding to, if you look at the accounting system, which internationally followed the combined would be much below 100, it is there. So when you're growing those lines of businesses, the expense moves up because you're paying it upfront it accounts for upfront. And also 1/n is also playing a bit of role in that. But broadly, if you see our, I think, ambition has been to be close to 100 at all points of time, which we are doing. But what you should be appreciative about is that this is 1 company e consistently for decades now, has been outperforming industry by full 15% to 20%, full points in combined ratio and still growing the number of customer base, still being like last year also pick it up. We have issued the largest number of policies in the industry, nobody is been close to us. Growing the customer base, capturing market share moving up the latter and maintaining this delta in combined ratio. This is what no -- and I'd be very surprised to find more companies which can deliver these kind of results consistently for such a long period of time. So that is why. So it's not a question in which you should feel alarmed or something. It is just the way to structure. And if the new accounting system, which is all internationally if we look at it, then the combined comes way below 100, when that comes into play. That's what Sreeni was alluding to when he spoke about that -- what the RBI is looking at in terms of bringing those accounting system, which is before internationally. Sreenivasan SivasubramoniamExecutive I think, Nidhesh, one more thing you have to notice is that in the long run, any P&L business like General Insurance is an ROE business. So I think what Sreeni also ready to do is that if you look at and if you bring the capital, though requirement is 150 for solvency, even if you take it at 200, and Raman correct me wrong, the ROE for BAGIC is over 20%, even currently, no. I think the loan for the second quarter is 27-or-so percent ROE that we're delivering. So this is the kind of return of equity delivering. And that, again, when the industry equity ROE is at 3%. So the outperformance of BAGIC to the industry is by these margins, which would be there. .

Question: Nidhesh Jain - Investec Bank PLC - Analyst : Sure. And in the motor business, I noticed that motor OD loss ratios have increased to 71%, which is on the higher side versus the historical trend. So any change in -- any trend but in the business or just a quarterly blip? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call

Question: Nidhesh Jain - Investec Bank PLC - Analyst : And last question is how do you see the GST impact on motor business loss ratios as well as in the retail insurance business? Tapan Singhel - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz General Insurance Company Limited So if you look at now GST has 2 components. One was input tax rate for distribution, which would be there. Second was because of reduction of GST, you saw increase of car sales happen, which obviously the motor business goes up. Also to retail health business, that also moves up. The same in hospitals also and OEMs also have other benefits in spare parts and all. Now if they pass it on to customers, as was the expectation by the government, then that would also bring it down. But there, we have to see proof in terms of how much they really pass on to customers. That would be those impacts. So you will see increase in the business in these lines of businesses, you would see the impact in loss ratio if they pass on the benefits they have in terms of be the spare part cost or be it in terms of the medical equipment cost, which should be there and being put it together. So this is all going to play out overall.

Question: Mayur Parkeria - Wealth Managers - Analyst : Just wanted to confirm, am I audible the operator? Tapan Singhel - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz General Insurance Company Limited Yes.

Question: Mayur Parkeria - Wealth Managers - Analyst : Okay. So again, congratulations to the entire team of life insurance. I don't want to sound very poetic, but clearly, within the Bajaj Group, a new star is getting born. We had 2 stars and now the third star also coming up. So that's a great and heartening thing. And it's not after one quarter. It is consistently -- we've been watching it over a couple of quarters now. So a great execution of the strategy, which has been there. Just on the question side, actually there was a question on this listing and response to that was also about the regulatory changes, and it will help companies with higher capital adequacy which we have. But in the light that now the profitability engine of the life insurance is firmly in place, and the fact that at a Bajaj Finserv level, we may have requirements of capital, does it make sense to have a dividend policy and will that lead to some correction in capital adequacy, how do we see that aspect from a parent perspective? And is there any thought process on that?

Question: Mayur Parkeria - Wealth Managers - Analyst : Okay. Okay. Yes. And actually, second question was also in line of the health, we have almost infused more than INR1,200 crores if I see it right on that number on the health and the side. When do we see -- and we are seeing almost INR30 crores quarterly run roughly losses which are there. When do we see that part turning around? And what would be our milestone in benchmarks over the next 3 years for that business in terms of profitability or something which we can monitor quantitatively and qualitatively both on that side?

Question: Mayur Parkeria - Wealth Managers - Analyst : So since I'm not asking a quarterly or a yearly from a milestone over 3 years, do we anything to look at it a more quantitative aspects while qualitatively, you have highlighted what is at play and how to look at it. Anything quantitative benchmarks which we would have internally

Question: Mayur Parkeria - Wealth Managers - Analyst : That is FY27. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. NOVEMBER 11, 2025 / 11:30AM, BJFS.NS - Q2 2026 Bajaj Finserv Ltd Earnings Call

Question: Mayur Parkeria - Wealth Managers - Analyst : Okay. Sir, I have a slightly short term, just numbers understanding my financial understanding on insurance is not very great. So pardon me there. But just wanted to understand, we have INR120-odd crores impact of the GST, which we have taken the quarter. Is it going to be recurring for 2 quarters, is my understanding right, the number? Or is it because all the impact has been taken. That is one. And that is the impact which we see on the, I think, VNB, but will it also -- how has been the impact on -- will there be an impact on embedded value or -- anything on the other side, which on a -- will there be an impact of that as we go? Tapan Singhel - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz General Insurance Company Limited The INR112 crore number that we're referring to tax PAT. Now you're right, there are 2 elements to it. Like I mentioned in case of NBM, there is an impact of all the policies that were issued until 21st September because as we keep paying renewal commission on renewals, we wouldn't get the GST credit, right? So out of INR112 crores, INR73 crores is back book as we call, and this is a onetime impact. This is not going to recur. INR39 crores is for the business that was written in the last 8, 9 days, and that is recurring. But I will make the same point that I made for NBM, there was a significant skew in those 8 days towards modular. So on an annualized basis, this impact will not be as opposed. But I think it is important to understand that the number that you're looking at is without taking any action. And as Tarun mentioned earlier, it's been more than 2 months. So it's close to 70 days since the GST changes were announced. And we have already taken a number of steps to mitigate the impact on PAT, NBM. Coming to EV, we have already reported, there is an impact that has been reported on the EV. It comes to 44 bps on EV because our NAV is very higher because we have high net worth as a percentage of this, it is pertinent to this. I think that will be more rightful measure if you want to compare our back book impact on EV compared to anybody else. I'm not sure -- Mayur, I think those are 2 questions you were looking.

Question: Mayur Parkeria - Wealth Managers - Analyst : Actually, it's on BAGIC itself. So definitely, we are in the first of a very significant leg up in our NBMs from closer to 10%, 11%, 12% kind of range to now even if we exclude the 17%, 18%, 19% kind of ranges, and we had these targets of 20% -- reaching around 20% we could have. So the question is, yes, it's the early journey. We understand it. But it is insight. It is in sight of us, and we are almost there. The question was, do we now in a position -- will we stay in this band for some more time, consolidate and grow the scale and profitability both? Or do we think we have -- we will be looking at the further next journey from here on over the next 3 years, more moving in line with where the Tier 1 margins for players are. Will that be the trajectory? Or will we consolidate here first for a couple of quarters earlier and then move up the next? Tarun Chugh - Bajaj Finserv Ltd - Managing Director, Chief Executive Officer of Bajaj Allianz Life Insurance Company Ltd So Mayur, there's a lot of things you've asked on that. But just to be clear, I think we'll take it a step at a time. And yes, there has been a gap. It's -- and I really -- I'm happy that also acknowledging that significant change. I would not jump ahead of my time, and I would not make too many forward-looking statements yet. And we take it step by step. There is also now the -- and we're handling the entire sector is looking at the GST impact. We are working on it. And I guess those sector first as to gobble up that and then maybe talk of times beyond that. And I guess there's going to be another quarter when we'll meet and have a quarter after that as well. And we will then be in a better position to respond to this.