Bajaj Finserv Ltd. (BAJAJFINSV) Earnings Call Transcript & Summary

Good afternoon and good morning [indiscernible] those who joined us. On behalf of CLSA I extend a very warm welcome to the third edition of the CLSA India Insurance Access Day. We've got the senior management team of Bajaj Finserv with us, represented by Mr. Sreenivasan, the Group CFO; Mr. Ramandeep Sahni, the CFO at BAGIC; and Bharat Kalsi the CFO at Bajaj Life. I'll stop here. Thank you, everybody from the Bajaj team to join us in this conference, and over to you for your opening remarks, and then we'll probably open the floor for Q&A.

Hello, good morning or good afternoon, but I'll say according to my time. Good afternoon, everyone. It's a pleasure to have all of you here, and I must thank Adarsh and the CLSA team for putting this together. Since all of you are familiar with the businesses, I think it will be best that we go ahead with Q&A about our businesses. But as a broad overview, I think the focus is predominantly on BFS and when we look at BFS, so Bajaj Finserv or BFS. And when I look at it over the last 3, 4 years, I think one is obviously Bajaj Finance independently listed and everybody is very familiar with Bajaj Finance and its [ being ] one and the app story apart from productivity apps and various other things they are doing. Along with their subsidiaries, Bajaj Housing Finance and Bajaj Financial Securities. But at Finserv, again, we are now building [ truly ] an ecosystem of companies. Lending is Bajaj Finance and Bajaj Housing Finance, then we have the 2 insurance companies, which are unlisted and joint ventures with Allianz. We have also during -- I mean which accelerated, I should say, after COVID was our 2 start-up ventures. One is Bajaj Finserv markets or Bajaj Finserv Direct is the name of the company. Bajaj markets is what we call it. Which is an open architecture marketplace for all financial services products. We have explained it in our conference calls what they intend to do and in last conference call, we also had the CEO joined to take some questions. Apart from that, we are also now with behind Finserv markets, but still it's gaining traction is Bajaj Finserv Health, which is a health care or you could, if you want, call it a health tech venture where we are trying to put together a digital platform by which providers of health care can access users of health care across doctors, hospitals, clinics, labs, and obviously, we are also entering into managed care services through Bajaj Finserv health. So largely, I think as we look at Bajaj Finserv, we want to know these entities together to perform and provide customers -- retail customers predominantly and small businesses with all solutions they need for protection, for financing, for upscaling in life, for buying homes or looking after their wealth management, for their retirement annuities. And we believe the long-term prospects are very bright. As India comes out of COVID and the prospects look very strong now with heavy government CapEx investment and a lot of confidence building in the economy in terms of investments. We feel that there is possible incomes will grow, the target segment of customers that we serve will continue to grow. And therefore, we will have very long term with great opportunities for us to offer our products to all these consumers present and existing customers. So I will not take more of your time, people now, I think, have open the floor for any questions if you might have.

[Operator Instructions] So my first question as we get the question queue build up. First question is for the Life business. Bharat, the life business has benefited a lot from banks opening up a couple of large banks have adopted open architecture that allowed scale-up for the brand [ 5, 6, 7 ] to meaningfully scale up and become very large parts of the market. What you see again is because of corporate structures and various compulsions those open architecture brands, and I'll call it specifically HDFC and Axis now. On to -- while they will not reversed their stance, clearly, they would have artificial limits on what their JV or their own [ subsea agreement ] end up getting, right? So I just wanted to understand in this context, while the last 3, 4 years, the businesses in LI have benefited a lot from open architecture. How do you see this landscape evolve? How do you develop more partnerships and in that context your growth trajectory?

So it's an interesting question, Adarsh. See, I think what is happening, there are 2 things which are working in parallel. So there is one, the regulator has opened [ 3 to 9 ] so there will obviously be a few opportunities in the market where -- maybe the banks are not be optimized in terms of the third-party distribution, and they may want to get new brands and especially brands manufacturing -- Insurance manufacturing brands which is nonconflicting to their core bank brand. So like Bajaj, Tata, Birla enjoy such advantage. So I think we will have some more opportunities coming up as far as newer revenues are concerned. Having come back to your original question, what HDFC kind of said it in the newspaper also saying that they may want to increase HDFC Life share and hence you believe that manufacturers will get the benefit of the parentage. To some extent, I think that may happen. Will it be an increase in the pie. Maybe the answer is no. Will it be a cannibalization between 1 to another partner, may be yes. And hence different company may see different stress or a benefit if that has to happen in Axis Bank, today, we are roughly 1/4 of the wallet share. So we are not like we have the lion's share in Axis Bank. The other is Max, Whatever we know as of now, there has not been any committed things saying that we will end up increasing Max Life share. It is all completely open architecture, and it's only on the strength of the product, people, process, and tech. So we haven't got any stress sign that it could create a stress on us. Having said that, what has happened over the last 3 years is that we started in a very structured manner like we started with liability sales, then we went into branch banking. Within that, we went to first region, second region and then fully pan India. And as of now, we cover all the wide spaces in the bank. And just an example to that, when we have still seen that whenever we launch a new product or a new initiative in a bank, the market share, the wallet share between us and Max can change significantly. So that says that there is nothing called an artificial boundary condition, which the bank has put in for Max. We are fighting on our strength, and I believe that will continue for us. As far as smaller banks are concerned, I rather see as an opportunity that valid brand in say a smaller banks, which we are not there. We can make a difference and we'll rather get a positive, that's where we stand. But a bank to bank it may differ, like in HDFC where it stated announcement in the newspaper, so I can't comment on that. But at least for Axis, we are there in India. There's nothing as such concerning as of now.

Got it. And just spending a minute on Beyond Axis, how you've developed, because what we've seen is, let's say, a bank chosen to be very selective about selling insurance and that manufacturer has tied up with many -- linked 2 banks and has done a lot of volumes, right? So I just wanted to understand where I'd be in that process?

Can you just repeat your question?

So I said, ICICI went very selective in selling insurance, I too tied up with 3, 4 materially -- second league banks -- second tier banks, and they are doing meaningful volumes. So where is panic on that chart.

See, if you look at that in the last 2 years, or even if I go last 3 years, if there were some 12, 13 opportunities in the market in terms of bank assurance, we would have won 8 to 9 or 10 out of that. So at least we've been -- we have a reckoning in the market when it comes to our brand and we believe that wherever BALIC has entered, it is not a cannibalization it actually enhances the pie, so to that extent, we've been there. The all the tie ups, whether IDFC, RBL Bank, now a recent one being J&K Bank, [indiscernible] DBS Bank. Wherever we have entered over the next 2, 3 years of partnership, we have become a significant player in that shop more than down 1/3. And I do not believe that we will be having any change in our stance. So there is an opportunity that comes up in a second tier bank and on merit we get -- I think we'll have enough market share. So for us, it has been positive only. We have not seen any negative assets of the regulatory changes.

Perfect. Sir, Srini sir, one question to you and we keep getting this. Maybe you've clarified it, but for the audience here if you can talk about it is certain businesses that we are trying to develop the markets business an open architecture or open architecture business, somehow kind of has some group clashes, if you can -- there's a bit of replication. So if you can just talk a little bit about any cannibalization, any -- any similar business lines being done by Bajaj Finance and then Bajaj Finserv does it as match. If you can just talk about overlaps, clashes or synergies either of the 3.

I think our Finserv markets, let us look at Bajaj Finance. Now they have invested in a 3-in-1 platform. They are offering the top, say, 1/3 or 40% of their customers, preferred customers to buy any product, which is on 3 clicks. But predominantly, Bajaj Finance is a lending company. People were there to take loans and in the process, the marketplace offers them the opportunity to cross-sell. So a person has bought a loan, then there is a seasoning period after which the person has made offers for buying cross-sell of insurance and they deal with multiple insurance companies, including BAGIC and BALIC. They also offer investments, FDs and all under that platform. That is Bajaj Finances' business, the customers belong to Bajaj Finance and predominantly it's a cross-sell platform. Part of the platform is developed by Bajaj Finserv Direct, because Bajaj Finserv Direct is predominantly a tech company. Originally, it was set up by a lot of the tech people from Bajaj Finance themselves going there and setting it up, Rakesh Bhatt went there and set it up. When he was gone back as [ ED ] of Bajaj Finance; and Ashish Panchal from Bajaj Finance has gone there. The purpose of Bajaj Finserv markets is that any person who goes to buy any product from any of our companies, including BAGIC and BALIC or Bajaj Finance, anyway, it's going to a marketplace. It's either a lending marketplace or reinsurance markets or somewhere they are checking out the rates and then they are choosing to come with them. So we thought why not our own marketplace. And that is how this concept came about. Until now, I think the traction in terms of number of visits to the website, the number of customer data, everyone who visits our website, we have at least 2 pieces of data, the mobile number and the data. And as they navigate our website, we collect more data from that [ particularly ] what they want. Today, we have, I think, upwards of 50 partners. On credit cards, we have all the big names, including ICICI, SBI, Axis with us, apart from Bajaj Finances' own credit cards, which is through RBL and DBS. On the lending side, again, we have multiple partners. And I think if you go to the app, you can see that the number of partners. It is expanding. And by end of the year, we should be having probably about 40, 50 partners on the lending side as well. As of now, we are not seeing any clash because people go to Bajaj Finserv markets to buy -- to take loans from multiple providers. We give them choice as well of credit card, loans. And because of the way we have developed this -- say marketplace is not a place where people go to shop for rates. It is a marketplace is where the marketplace operator actually gains customer insight. You have a set of manufacturers who provide their risk engines and as the customers interact more and you sell more, you get more and more insight about the customer, which means that, let's say, a customer goes to a Finserv markets and we say we have a choice of 6 loans for that particular product that the customer wants. But we may end up offering only 3 of them or 2 of them because we believe given the customers' background and the insight we have, these are the 2 ones where a deal is possible. So therefore, it has 2 distinct pools. One is a distribution revenue pool, which we'll get from all the partners because we are distributing business for them. And there is a manufacturing profit pool, which each of our companies will also compete in the marketplace and get. So originally, it started off with predominantly BFL's acquisition engine for BFL, the first year or so. Where almost 95%, 98% of our business was BFL. Today, we have, I think, as of FY '23, we ended the year maybe at about 26% business from outside of the BFL network. Over time, we expect that portion will continue to grow. And hopefully, in the next 2 to 3 years' time, we should arrive at somewhere close to 55% to 60% BFL and the rest being open market. What it gives us is obviously -- a new to Bajaj customers. So this is one of the ways we are building an ecosystem where our target customer will come into our ecosystem. Potentially all of them may not be our target customers because our companies have their own risk profiles and the customers they want to lend to or the customers they want to ensure. It's not necessary that all take products from us. But even if they don't, they could still end up buying some other products from us in the future because they are got used to the app, and that is highly rated. We lost -- I think we employ more than 300 engineers in that company. It's a different environment there all together. It's in a different place. That is one part of the business. The loan business will continue to grow. We now have tie-ups on the loan side also with Axis. I think ICICI has joined already, and we have other partners like PNB Housing Finance and many lot of fintechs are there as well. So we are not seeing that as a clash, say, Bajaj finance cannot offer a choice of loans, they can only offer Bajaj finance loans. Finserv markets can offer the customer multiple choice of loans. There may be certain customer who is not a good lending customer for Bajaj Finance, but a great insurance customer of BAGIC, maybe they'll go there. Maybe they will not buy either Bajaj Finance or BAGIC product, they -- maybe they go with some other partner of Finserv markets, but still they are in our ecosystem. Next time they want to buy something then they'll again come back to us. They're happy with our service and the operational excellence through which we deliver experience. So this is the genesis of Finserv markets. And as of now, we are quite happy with that. The second area, which we announced, I think we started, I think, piloting that late last year is a vertical called Scaled-up, where we are getting into digital technology services, where we provide a combination of the financial services knowledge we as a group have to develop small software projects for companies. We have developed a marketplace for fintech. We are in discussion with a couple of banks to develop bank insurance, lead management platforms. We can work -- they also work with some of our insurance companies to develop specific APIs and things like that, which they need. Otherwise, you would use external partners for and sometimes you don't know the credibility of that served partner and their long-term sustainability. Because as we look at the digital marketplace, one thing we realized was you deal with a lot of partners and a lot of them are startups, fintechs, all kinds of people are there. And then your service offering is only -- I mean, seamless is only as good as the weakest link in the chain. If -- so therefore, Bajaj Finserv markets takes on some of these responsibilities, then they become a digital front for developing many of these applications. These are not stuff that a large IT company would be interested in or they're addressing it. So if you look at it as digital technology service, the financial knowledge there would be quite a substantial portion of our financial services knowledge. There would be a substantial portion of what we tell you. We can bring speed to market, we can give templated solutions. But at the same time, the risk engines or the algorithms that manufacturer use are belonging to them. We have no access to that. So we would not provide that except the knowledge that we have. We think there is a great opportunity for that. It is still in a very early stage now. But I think over the next 2 years, we want to scale it up. And we potentially, this is one area we think as an opportunity outside India as well, especially in the Middle East, Southeast Asia because these are not bespoke tech -- I mean these are, in a way, bespoke, but they're not large-scale technology integration projects. There are specific solutions for specific problems that we can deliver. So we are now putting out the numbers every quarter in terms of the number of customers who visited us, how many we are converting, how many are paying, what kind of products they're buying and things like that. And as we go along, we'll try to improve the disclosures further on those. Predominantly, it's a lending platform, but we are also now selling a lot of sachet insurances to them through multiple partners. BAGIC is one. We have -- I think the Aditya Birla maybe ICICI Lombard is also there now. So there, we will offer a variety of products where we use them to bring customers to this platform. This is one platform where people can come to buy an insurance product, they can come for loans, they can come for BFL product. They may not buy a BFL product. So we are quite -- I think so far, it has been going in line with what we wanted to do, and we hope to scale it up. So we have capitalized it with approximately $100 million now. BFL has taken a stake last year of about a little under 20%. And as of now, we are having visibility that by FY '25 or by FY '26 first half, we should actually cash breakeven by generating, there's only way a business like this will breakeven is when the earning from the customers you have already acquired by cross-selling multiple products compensates for the burn that you do to acquire new customers through digital marketing and other efforts. As of now, we have some visibility there. That does not mean that we will not continue to invest in capabilities in people and in acquiring customers to the site. So this -- today's picture is like this. But if we find growth opportunities, we'll put invest in those.

Perfect, Srini. This has been helpful. Raman, I had a couple of questions for you. On the GI business, right, on a more broad scale and then get to questions backed up by investors is one, clearly, in the last 2, 3 years, last couple of years, coincides with Stars listing, I think people have realized how structural the opportunity has picked up, a little bit ignored by GI companies on a more broader level. Where are we in the journey? Our growth being a little bit more volatile there, so we grew in '22 less growth in '23. Again, so I just wanted to understand how we are scaling up. Clearly, the listed players like Lombard are investing a lot there, and they understand that, that these needs to click. And second one, your view on competitive intensity in Auto's, the feedback seems to be suggesting that things are quite competitive now. Hence, a couple of large players have been a little slow in that business. You clearly have done much better growth outcomes. So just wanted to have your views on more of this.

Thanks on [ eye sighters]. So on health, like we all know, there are 3 large segments of health. One is the retail health, then there is GMC, which is the employee contracts -- employer-employee contracts and then there is a government health piece. If I look at -- let me go in the reverse direction of its importance, actually, government health, as you know, we largely do it if we make commercial sense for us. These are bulky tender-driven businesses. We've been doing 1 or 2 every year. Last year, we didn't have anything material before that, we had the Gujarat government health scheme. Which was about INR 750 crores of premium, decent one. So we -- because we realize we will make money out of this if we got the tender and we sustained that. Last year, however, was not so good a year from a top line perspective because none of the tenders met our expectation commercially and hence, we didn't write any of those contracts. So these are some businesses. Given the commercial calls we take from time to time, we end up writing only if it meets our bottom line expectation. So that's why this causes some volatility in our top line, because these are large bulky businesses. Then comes the GMC business. Now if I go pre the pandemic, this used to be a loss-making for almost all the players. And we would have also [ caused ] cautioned and said that we will be going slow on this business. And we indeed before the pandemic went slow for about, I think 12 to 18 months, and there was de-growth almost quarter-on-quarter pre-pandemic all the quarters, if I go about 5 to 6 quarters. But fortunately, after the pandemic, things changed drastically. One, obviously, from the claims experience perspective, almost everybody repriced their GMC contracts, which was kind of favorable because when we did the pricing, there was still an overhang of [ the pandemic ]. And obviously, we baked in some bit of that in our pricing. Now given that, obviously, the results were positive because the pandemic indeed died out almost. And hence, from a loss-making proposition, it ended up to become a profitable proposition. And fortunately, in the last 15 months, if you see our growth, it's been upwards of 30% in this segment. So from being a drag on the bottom line, it suddenly has become a profit contributor to the industry. The other thing which I did was, one, obviously, repricing. The other was the coverages people realize most of the corporates, including ourselves, realized that the coverages we were offering for our employees was on the lower side. So most of the corporates we realized, revisited their coverages, and we also got a debt premium from that. And that's why this healthy growth of upwards of 30%. So as we stand today, GMC looks profitable. But obviously, how the industry is when everybody sees profitability, then the negotiation starts and then you start seeing some stress on bottom line. But as we stand today, like I said, the business is profitable and growing at a very fast pace because of the reasons that I just articulated. Coming to the third piece, which is retail health and which is where most of your queries revolve around. See, we realized prior to the pandemic that we are missing something which this SAHI company seem to be doing very differently from all of us. And hence, we started investing in this line of business. But unfortunately or maybe fortunately because before we started investing the pandemic hit, and we then pulled the plug and we stopped all the expansion. And we started going slow for almost 15 months to 18 months on investing in retail in terms of the number of people or new products and so on and so forth. But post the pandemic, when we realize it's settling down now. We introspected a lot and we decided now that's the time to really start scaling up. And if you see for the last 2, 3 quarters, we've been doing better than the multiline players while not as much as the growth which the SAHI companies have been seeing but we've been doing better than the multiline companies on retail health growth. One reason why -- actually, there are 2 reasons why the SAHI companies are so different and we've discussed this at multiple occasions. One is the regulatory arbitrage they have access to today. Just on the benefit of everybody. When I have to -- the GI or LI company has to onboard an agent, it's a very long-drawn process of a 30-day licensing, training and so on and so forth. So the process is a very long process, and many people I need to include the examination. So many people are not inclined to come onboard. Whereas similar setup for a SAHI company is as easy as one declaration being taken from an LI or a GI agent and an agent being onboarded by a SAHI company. So they obviously had that arbitrage on distribution, which was one big upside they got. So they got regular distribution from LIC's for example and many more of us. Right? So that's one benefit behind now. Obviously, we can't -- while we did make several representations to the regulator, but that's arbitrage they continue to enjoy. The only way to -- for that arbitrage to work in the other direction. Could have been -- if the way the regulatory framework was moving, If, for example, the LI companies were allowed to help. And as we know, most of the SAHI agents come for the life companies and if the life companies themselves started doing health business, then that could be a big damper for the SAHI companies. So that's just the arbitrage and the risk associated with that, which is something which we are living with today. But the second reason why we realize SAHI companies are planned too well is that we realize -- because they are monoline companies, health is their bread and butter. So all they're might on whether it's distribution or underwriting or claims settlements just focused only on health. Whereas for a multiline company like ours, it just happens to be one more line of business. And we realized to break this myth, we need to do something very different. So starting first of April, we've created -- we've carved out the entire health portfolio within the company as an SBU within the company. So it's a company within a company, which now we've created, which is headed by CDO from and he's ex-CDO of one of the SAHI companies. He leads this. And the way the SBU structure works is right from products, distribution models, underwriting, claims assessment or the health administration. All of this now resides under one vertical so that the focus which one is being put in a SAHI company can we replicate that was the whole agenda. And as we speak, we are adding a lot of capabilities to that SBU unit, maybe another 60 days to 90 days time, that unit will be completely up and running. It's already up and running, but we're just adding some more senior people there to replicate the SAHI model completely. Now having said that, we personally believe that once this is in place, we could outperform the industry especially the multiline players and probably be closer to the growth which the SAHI companies are delivering today. One more angle to this is that as a strategy for the company, one of the big initiatives we've realized over a period of time, and that's kind of correlated with your second question also Adarsh, is that we realize that the competitive intensity in the market is crazy today. To exactly the point you made. And most -- when we look at the numbers at an industry level, most of the businesses are concentrated in the top 50 to 60 cities. So the reality of life is that all the '23, '24 companies are competing again for the same customer in the same market and hence, the competitive intensity. Then we realized that If I go deeper into the country, which is beyond the 50, 60 cities, there is still a huge amount of opportunity, which is available there and not many multiline players have been present there physically. So we realize that is one big opportunity, and we called it the Bharat opportunity. And we realized the 2 most important products which we will emphasize on in that segment will be two-wheeler business and retail health business. So that's the other opportunity which we are working on, which will coincide with our health strategy and expansion around that. So hopefully, that answers your first question. Moving to the second one. On the competitive intensity, you're absolutely right. It is as crazy as it's been. In fact, this morning, somebody asked me the question, has the competitive intensity changed? I said that intensity has not changed, but the people who were causing some stress to the market has probably been changing over a period of time. I joined the industry about 3 years back. And the stress at that point of time was largely from the younger or the new generation players because we had the capital to burn. They had to make a mark and hence, they were buying out businesses at whatever prices and whatever discounting they thought was appropriate. If I go to 2 years, 3 years later, while those guys still continue to burn capital. But even the more mature ones, have now added some cares to the market because they have pressures to compete with likes of ICICI or Bajaj and hence, they've also jumped into that competition bracket, right? So that's what I -- how I answered that question to somebody this morning. So I think the only mature people has been the top few like us or probably Lombard and they have continued to do sensible business. But otherwise, the competitive intensity is as crazy as we've seen over the last probably a decade.

Got it Raman. I have a follow-up on your Health please. [Operator Instructions] So a follow-up on the Health business, right? You say that you put out a separate SBU will be run like a SAHI inside BAGIC. Now the point is, once you put out a team, what we learned is it takes a lot of time for the business to scale up right, both in terms of hospital network, gearing your agency -- the right agency network. So it's not like touch and go now, right, if you take at least 2, 3 years because I think Lombard's feedback is they've been at it for about 2 years, and now the slowness starting to see volumes come through. So when you say that we should start seeing growth more closer to SAHI. Is that a few years away or the base is so small for you even start growing this.

So I think your point is valid. But if you look at our distribution network, what is the challenge today like I articulated earlier, I have 100,000 agents and personnel. However, for them, Health happens to be one more product, which they are spending. And there is no focus from a single unit to drive Health across this agency force or the POS network or my bank insurance network. Now what this SBU unit will do is not only focus on pending distribution like you rightly highlighted. But I have -- we take pride in saying that we have one of the largest distribution network in the country. And probably for the bank up is one of the largest in the world. We have 250 bank, banker tie-ups. We have 100,000 agents and personnel. But this distribution force is already available with us. Now is there a focused approach on, for example, do I drive campaign specifically on Health with this portfolio of distribution and serves more today. So that is what this SBU unit will try to also capitalize on, and our first endeavor is [indiscernible], one is that distribution might, which you already have, but we have not exited it for -- as a health piece because for them, like sorry, repeated many times, it is just one more product. Yes, and like Srini rightly highlighted earlier, it is very easy to sell a motor product vis-a-vis anybody else, any other products today because it's mandatory. And hence, all other products take a vaccine unless demanded by the customer. So to your point, I think when we run these 2 [indiscernible] that while on latter, obviously, it's going to be a store process. But on the distribution piece, which we already have, we firmly believe that we can exploit that a lot vis-a-vis -- what distribution we might build over a period of time. So that's how I would want to answer.

Let me just add to what Raman said, because I've also been engaged with the team on developing this. I think BAGIC has formidable distribution, as you know. And some of the early efforts made by other companies and to some extent by BAGIC also has been to develop an independent channel only for distribution. We have realized that, that is a long road, and it may or may not pay back because an agent -- agent by definition are multiline. They have customers and whatever products those customers want, they have to offer them and therefore, they will sell motor, they will sell health [ and some others ]. Since we already have a lot of agents who are selling predominantly commercial lines, motor and other products. Our objective is, first, how to increase the penetration of health through the same network, which is quite formidable. Secondly, as Raman pointed out, we are making a significant imprint in 2 smaller locations through a separate horizontal vertical, which has [ banca] which has agency which has dealers. And where we have unique or rather differentiated strategies for different locations depending on the demographic profile of the people staying in that location. Some will be focused more on [ banca ] some will do more of this, but all of them will be focused on health because we feel there are a lot more under penetration there. Thirdly, I think for this initiative to deliver, it is not enough that you gaze them to distribute and cross-sell, but we also need to give them the ability to handle underwriting, claims and products. Because the whole thing then gel will like a SAHI company. So we'll have a large team of people in this company aided by that hand, the distribution, the underwriters, the doctors and everything. Whose 24/7 is to develop. They have to think like health. This is, I think, where if you compare the SAHI companies with composite companies, one of the reasons why they made inroads was a composite company by definition does a lot of stuff. They do motor. They do commercial, they do big corporate. And therefore, health would have got 5%, 10% of the bandwidth. And always in that dynamic market like this, we're always thinking of what next to do, what to cut, what to add. I think this health vertical will give a definite focus to that. We don't think we are too late in the market because India's market is huge. They're already the largest, most populous country in the world by many estimates, and we think there's a big play there. One more thing this vertical will do is also to work closely with our health care company. We already have a big success with our OPD products and services. They are also now jointly with BAGIC offering OPD services to a lot of corporate clients like managed care services, if you want to call it, and we will continue to scale up that business more on that side. So together, I think they can offer. We have a formidable product range. We just need to sort of -- late the distribution to get scale in that particular set.

Got it. Now Bharat one question is, as per your current arrangement, is there a maximum feet on street that you can deploy at Axis without any constraints. Over a period of time that got relaxed by the bank, right, where you could physically be present. We believe now it's an equal footing for any of the insurance brands with Axis. Just wanted to understand where that arrangement is. Is there a freeze now or you can expand more, if you want?

There were never a freeze and there is no reason to have a freeze also. So it is a completely on merit basis. It's an open to all the people who are at the branches on merit of the product engagement and the process. The sale is allowed. There is no artificial restriction on any kind, nor people, nor product, nor location, nor system, nor tech.

So what we have learned there to add to what Bharat said, is that as you Bharat Axis is only about 4, 5 years old relationship. We are building and smartly growing our productivity of the people, and we think we can significantly increase by the productivity of the existing manpower itself in terms of numbers. Secondly, we have a big initiative called digibank, where we have invested a lot on the digital seamlessness of the entire operations between the bank and us. And if you ask me why we are getting such a big share of Axis, it's predominantly because of our digital capabilities and the seamlessness. I think as we go forward, a new entrant will take some time to build this. We think it will take 3 to 4 years to build the capability that we have today. And hopefully, we would have moved another 3, 4 years ahead into that. So it's an open market in a way. It's a different kind of marketplace, it's not digital marketplace. But in a marketplace, I think the person who has more competence will be. So we want to continue to develop those competence and lot of these competencies are available across our [ banca ] partners, not that we have to reinvent the same thing for different people.

The next question, I think Gaurav has raised hand. Gaurav your line is unmuted. You can go ahead. Go ahead with the question yes.

Yes, okay. So my question is on life insurance. And the question is, how is the competitive intensity shaping up and also under the [ UAM ] guidelines, given there is no cap on commission payout now. So how is the pressure to increase payouts more so on the open architecture [ banca ] partners? And how are we responding to it.

So not really as of now, we haven't seen any so-called discussions to increase their payout and all that stuff. So I think first is that the commercial arrangements -- changes remain same. But yes, wherever we are going into a new potential partnership there, obviously, someone who is more disparate, willing to pay more commercial. Those kinds of discussions are there, but nothing has happened in the existing one, and we do not see that happening. New ones may become little expensive, but that's I think -- that's the problem of being open in terms, so there is no limit, but nothing as such significant has changed for us.

Just a follow-up on this. From a growth standpoint, given the product mix, given a lot of new [ banca ] partners, we would have entered new others would have entered new -- is it that a lot of low-hanging fruit would have already been captured and that is where we should see a -- all pencil in a little lower growth.

See, I think this year will create a base effect. So just look at the Q1 of last year and this year. Q1 last year, we grew by some 80%, 83% because of the previous quarter was COVID year. And hence, there was a base effect which is kicking in, in this year, specific to Q1. And similarly, if you look at Q4 of this year, because of the budget -- union budget changes as the sales of the traditional business become everybody reported a significant growth. So Q4 of this year is artificially high. And Q1 is, from a growth perspective is -- will create a problem of the base year. So both the Q1 and Q4 has a base effect in this year. This year, as an overall thing, I would imagine like this it will show a nominal growth only because of the base effect and next year will -- really become a real insights about how the industry is doing it. This year, there will be too many pluses and minuses happening. So for us, Axis Bank was the largest channel in terms of the bank assurance side. And last year was a full year for them. So last year has already settled into a base effect. So we started in reasonable manner on the branch banking last year, we were pan India. So last year also, we were getting some new customer segments, new geographies and we were growing much faster. Now this year, it is a complete access to what we had last year. So from there, obviously, the growth will not be as exponential as it was last year. So for us, specifically, that will play for the industry Q1 and Q4, both will play because of the high base effect.

That was helpful. Just the last question, if I may squeeze in, similarly the way you articulated your view on AP, what would be your view on VNB margins shaping up?

See, again, 2 things will play in. One. Last year, if you look at on a full year basis, Q4 had a lot of high margin, high ticket non-part saving business, which has come down because they're greater than 5 lakh for the industry, whatever stock exchanges disclosure was there and in our case, it was 8% to 9%. But if you be discussing the early call also investor call also where Q4 saw almost 24% of the quarter 4 business coming from that segment, which is high margin. So again, this year, last year was a high margin because of that, and now you will have to grow on that. So that can have a one bit of moderation coming to the VNB growth. The second thing is that the margin we reported is on an MCV basis. So if you look at the yield curve between last 3 months or 6 months, that is almost like a parallel shift curve on both. So the short term yield says, it's like a flattish yield curve. So what you were even getting on [ FRA ] maybe a 10, 15 basis point lift because of the OIS borrowing and [ FRA ] that has also gone up there. So the net-net [ FRA ] what we are locking has come down. MCB uses a flag risk of that has come down. Last year had a base effect of high margin, high ticket size. So that would moderate to some extent though VNB growth for the industry. And so it's for us. How it pans out over the next quarter is what we'll continue to report.

What Bharat said, I think the focus we have given to the company at least is that focus on NBB and not NBM. So the business is very complex. There are multiple businesses with multiple margin profiles, multiple risk profiles, multiple [ term insurance ] and NBM really does not capture any of these. NBB does, It captures volume, low margin, high-volume businesses, high margin, low volume businesses put together. So as long as they are able to grow their NBV help in a healthy manner. We should be okay. But there will be some financial assumptions, which will be cyclical. Like yield curve and all that, that we aren't really concerned about that because as the yield curve changes again, you will again get the benefit. But we look at the operating performance, and we track that with what falls and everything on the regular basis as company does that regularly. And therefore, that is our focus.

The other thing is Gaurav that, see we have tied up with new banks like, as I said, we tied up with [indiscernible] Jammu&Kashmir Bank and all. They may not be big today, but they are at the investment stage. So obviously, the incremental business coming from there may not be either at a company average margin labels. Similarly, we are expanding our proprietary channel within agency. We are opening up more channels. It's like a channel in a channel strategy. Again, they are at the early years of their investment stage, where from year one getting the similar kind of efficiencies or the company average margin will always take some time. We can be fast, we can be super fast, but we can't achieve something which typically takes 7 years, 6 years, we can plan achieve it at a 3-year, 4-year, but we can't achieve it in the year one-off, any new investment into any new channels. So it will come with a lag. The share of those businesses going up will always have a little bit of average impact on the NBM what Srini is saying. But we maybe NBV value created. The answer is yes. But in NBM, it may not reflect in the same ratio as it's a company average margin on a full year basis.

As we draw more closer to the end, Srini, there are a couple of questions. Maybe you can reply in short, if you can. First is, is it fair to benchmark your originations at Finserv to more open market platform like Paisabazaar, given that, that's also a lending platform more online? And the number 2 question is data captured under Bajaj Finserv, hence, can that be used to underwrite Life and Health policies, the whole Bajaj Finserv data or being a third-party platform, you really can't use that data to underwrite policies in your subsidiaries?

No, we can't use the health data from Finserv Health. Those Health data is very private. But Bajaj Finserv held today offers BAGIC products as a group platform. So they do a bit. I think the last year, they did about INR 60 crores, INR 70 crores of retail health business through that platform. That will continue to invest for some time. But I think the real game in Finserv Health is not that. It is that if you look at globally, especially in U.S. successful companies like UnitedHealthcare, which is what we benchmark with or we start looked at. I can't say we can't benchmark with them yet, is that a lot of their profits actually come from the service call often where they do a lot of managed care services. And the common theme of successful health insurers globally is that -- they control a big -- or they are participating in a big chunk of the whole payment space of health care. So obviously, in India, it is very fledgling, a lot of the payments are made by insurance companies, but insurance itself is not paying a significant proportion of the total health payment. Government incurs a lot of expense but over time, we want to get more and more participation in all these pieces through what we have as a group is operational excellence through digital platforms. So clearly, connecting providers of health care with use of health care is one; 2 leveraging the distribution network of our group companies, for example, the OPD product, which is a stand-alone product of Finserv Health is distributed by Bajaj Finance, the OPD rider is attached to the BAGIC policy. Now a version of that is coming for the group health as well. We are now working with BAGIC on that. So if you talk about synergies, it's not just about sharing customer data and cross-selling, because typically, you see in financial services, the hit rates of cross-selling are very, very low now. It is about how do you use the distribution capability of the established players for the startups to offer their services and how can we jointly offer products which can enhance value to the customer who anyway are coming to the ecosystem through any of these doors. So just we are opening more and more doors for the customers who come and experience our services. And they're all part of the ecosystem. Potentially, they'll remain with us, they'll keep coming back to us. And in the process, we'll continue to sell more products to them. Markets, we had a question, which was can you repeat it?

Compare that to Paisabazaar is that...

I think you can compare that with many companies like Paytm, Paisabazaar, but we do -- it's now with many companies. It is not that we are not either of them because see -- pure-play DSA needs to spend a lot of money in acquiring customers. Today, we are not spending that kind of money because we already have offerings from our group company and through the manufacturing tie-ups that we have. We already have a lot of products we can offer, which is why we are very confident that in another 2 years' time, we may actually cash breakeven on the existing businesses that we have. This is, I think, a fundamental thing because moment you set up a pure-play and you can start a payment company, you can start DSA, an online DSA, fintech, whatever, but you have to burn a lot of money just to acquire customers. And then what do you do with those customers. We don't have the second problem. We know what to do with those customers. We have enough offerings. And if they don't, they buy somebody else's product, I'm still making a distribution revenue from that.

I think Srini this is good. We're at the end of the hour. We have another call, but this has been super helpful. Thanks Srini. Thanks Raman and Bharat for joining us, the whole Bajaj team. This was super helpful, and look forward to more participation and all participants, thank you for your participation in our forum and look forward to the next session.

Thanks a lot. Thanks to you Adarsh. Thank you CLSA. Thank you everybody who joined the call.

Thank you.