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

Ladies and gentlemen, good day, and welcome to Bajaj Finserv Limited Q2 FY '25 Earnings Conference Call hosted by JM Financial. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Raghvesh from JM Financial. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and welcome to the 2Q FY '25 Earnings Conference Call for Bajaj Finserv Limited. First of all, I would like to thank the management of Bajaj Finserv for giving us this opportunity to host the call. As always, we'll have opening comments from the management team, post which we'll open the floor for Q&A. From the management side today, we have Mr. S. Sreenivasan, CFO, Bajaj Finserv; Mr. Tapan Singhel, CEO, Bajaj Allianz General Insurance Co; Mr. Tarun Chugh, CEO of Bajaj Allianz Life Insurance; Mr. Ramandeep Singh Sahni, CFO of the General Insurance Business; Mr. Vipin Bansal, CFO of the Life Insurance business; Mr. Ashish Panchal, CEO of Bajaj Finserv Direct; and Mr. Devang Mody, CEO of Bajaj Finserv Health. With that, I would hand over the floor to Mr. Sreenivasan, for your opening comments. Over to you, sir. Thank you.

Thank you very much. Good morning, everybody. I welcome, everyone, to the conference call to discuss the results of Bajaj Finserv Limited for Q2 of FY '25. As before, in this call, we will largely be concentrating on the consolidated results as well as the results of our insurance operations for BAGIC and BALIC and where material, the stand-alone results of your company, BFS. Bajaj Finance, which is another major subsidiary of ours, has already had its conference call or if there are any high-level questions on BFL, we're glad to take that as well. I will also take you through some of the key developments from some of our other subsidiaries, including our AMC, our marketplace business as well as our health care business. Before I go into the call, with respect to the news article published in the mainstream media and the disclosure that we made regarding the intimation by Allianz to us of their decision to exit the joint venture, we have already put out a press release. There is no significant additional information that I can provide you at this stage. We will -- as and when things evolve and as required under the applicable law, we would make disclosures as and when it is ready. Therefore, I would request you in this call to focus on the operations of our companies, and we will be glad to provide any clarification that you need in this aspects. The only thing I would say that in the last several years, we have built 2 solid businesses in Life and General Insurance business, and we have always had 74% equity stake. And this will continue to be -- Bajaj will continue to be the dominant shareholder in this business in the times to come. Any statements that may look like forward-looking statements are just estimates and do not constitute an assurance or indication of any future performance result. As required by regulation, as you are aware, BFS prepared its financials in compliance with Indian Accounting Standards or Ind AS. The insurance companies are not yet covered under Ind AS. They have prepared Ind AS financials only for the purpose of consolidation. Accordingly, for BAGIC and BALIC, the stand-alone numbers reported are based on non-Ind AS accounting standards or Indian GAAP, as we call it, as applicable to insurance companies. Our results, the press release accompanying the results and our investor deck have been uploaded on our website within half an hour of our results. I would like to draw your attention to the newly revamped investor deck with an executive summary and significantly more disclosures. We do hope you appreciate this and look forward to your feedback for further improvement in that. Coming to the -- I will now start with the results. Our total consol -- as you have seen, generally a very good quarter for growth across all our businesses. Our consolidated revenue grew 30% for the quarter. And for the half year, it is 32% Y-o-Y. We ended the quarter with INR 33,703 crores of total revenue. The profit after tax was up 8% Y-o-Y for Q2 and 9% Y-o-Y for H1. And we have surplus funds now in Bajaj Finserv of INR 3,546 crores, which is 28% higher than last year. Coming to the individual businesses. BAGIC's gross written premium for the quarter, the headline number is down 20%, but it is predominantly because of a large requirement of health business, which got shifted to Q3. So we hope this will get stabilized in Q3. But nevertheless, the underlying growth is significantly above market. BAGIC had a profit after tax of INR 494 crores, which is 6% higher than a combined ratio of INR 101.4%. The life insurance continues to deliver us market-leading growth while in the individual rated new business at 34% Y-o-Y. The NBV, the new business value was higher by 3% Y-o-Y, then NBM is down by 3.8%. As you may have seen from the disclosures of other companies, the NBMs have dropped across the industry and I'll come to the reasons soon. Gross written premium was higher by 23% and our AUM at INR 123,178 crores was 25% higher as well. Coming to the consolidated results of BFL, the strong growth, 29% on AUM. Total income up 24%, 13% growth in profit after tax and the gross NPA at 1.06% and net NPA 0.46%, continues to be among the best in industry. And with a ROTA of 4.48%, which translates into an ROE of 19.08% annualized. Our newly listed subsidiary, Bajaj Housing Finance ended with 26% growth in AUM; 18% growth in net total income. The profit after tax at INR 546 crores was higher by 21% and the credit performance continues to be exceptional at just 12 basis points of net NPA and 29 basis points of gross NPA. The ROTA of 2.5% given that business is low-risk, low-margin business is quite satisfactory, it translates into an ROE of 13.03%. Coming to some of our smaller businesses, the Stock Broking business, which is under Bajaj Finance had a very good quarter again, 78% growth in revenue from operations at INR 121 crores. The profit after tax is up by 185% at INR 37 crores. The AUM at INR 5,430 crores was largely the margin trade finance AUM and an ROE of 12.03%. So our emerging start-up company, it has already reached a level of profitability we are comfortable with, but we'll see good run rate for growth in the coming years. The Marketplace and Tech Services business, again 30% growth in the revenue from operations. The profit after tax is down to just INR 6 crores for the quarter as against INR 18 crores. And the Healthtech and TPA services again has revenue from operations at INR 233 crores. We aren't comparing the previous year because this year we acquired Vidal and therefore, the year-on-year growth is very high, but it's not comparable apples to apples. The profit after tax was negative INR 32 crores within our plan, of course. And the cumulative capital, we have infused in the business is INR 1,086 crores. The Asset Management business again had AUM close at about INR 17,000 crores, and as I speak, it is about INR 18,000 crores. It had a revenue from operations of INR 10 crores. And as you know, in the Asset Management business, the revenue comes over time as the asset builds gradually over time. Coming to the highlights for each of the individual businesses. BAGIC, muted industry growth across various segments. Given that, excluding Crop and Government Health, which are more volatile, and particularly, the Crop insurance that's been subject to significant price compression as well with a new 80-110 and 60-130 schemes, BAGIC's gross written premium actually increased 11% in the core business, which is higher than the industry growth of just 4%. Combined ratio continues to be good, but it was affected by NATCAT claims. So it is higher than last year. From 95.3%, it's gone up to 101.4%. Excluding that, the combined ratio would have been below 100% at 99.7%. Under the NATCAT claims, as I told you, there was an underwriting loss of INR 48 crores versus an underwriting profit of INR 37 crores, and we hope by the second half, we do get an opportunity to recover that. The solvency margin is very strong at 312% as against the regulatory norm of 150%. BALIC market beating growth. Market share has increased to almost 9% of the private sector, now 8.9%. In Q2, BALIC ranked 6th among private players and 3rd on Retail NOPs. I think this is a very significant move over the last couple of years where BALIC has been acquiring new customers and the number of policies and new business that's grown; it's now number 3 in the market for the quarter. The new business value grew by 3%, notwithstanding the margin pressures. And predominantly, the margins were down across the industry because of the significant increase in the sales of units, which are lower-margin business for the industry as a whole. And we have seen from some of the other companies that publish their results, that's an industry phenomenon. But given that the growth in NBV with these headwinds is actually quite reasonable. Coming to Bajaj Finserv Health. The integration work has commenced post-acquisition of Vidal Health and the consolidated revenue for the quarter is INR 233 crores. Clearly, as pure Healthtech start-up, the amount of revenue is very encouraging and as we continue to integrate Vidal, we see a lot of run rate for growth for Bajaj Finserv Health. Bajaj Finserv Direct, clearly, the INR 6 crore negative profit in the quarter, we do see very good visibility that in the next couple of quarters, we might actually break even. On a cash basis, we may break even a bit earlier as well. And now has narrowed to INR 6 crores as I told you. For AMC, as already mentioned. And Bajaj Finance, capital adequacy remained strong, 21.69%. Tier-1 capital is 20.9%. Housing Finance, I already covered. The IPO was one of the most successful in the history of the Indian public sector, and we are now sitting on significant capital adequacy, which will help them play the emergent. The growth in the housing market is quite well in the quarters to come. With that, I hand over the mic to you for Q&A, and we look forward to questions on our businesses.

[Operator Instructions] The first question is from the line of Prakash Kapadia from Spark PMS.

Yes. A couple of questions from my end. On the health side, typically, when we are looking to scale what are the combined ratios on the Retail and group side or what are thresholds for scaling that business, what has your experience been on the Government side of the health business? Because if I try and look at our GDPI growth, in the first 6 months, it's degrown partly due to health TP and Crop business not growing. So what will bring back GDPI growth in the medium term for us? Those were my two questions.

Before I hand it over to Tapan, I think if you look at BAGIC's history over the last 20 years, when we started business, people said don't do motor business. Everybody was very interested in the very attractive corporate business, which was under the tariff, very cushy tariffs in hindsight. But from the first year, we started making profit. Similarly, over time, we have entered into those business. We have entered Crop business. We have gone into rural markets. We have done Government Health, and we have a very clear focus on underwriting profit through our combined ratio and risk management. This business is not just about GDPI growth. It is a combination of growth and how you maintain profitability, and risk is more critical to this business. Now I hand over to Tapan to take on the question on the crop, farmlands and the Retail health business.

So if you look at it our growth, if you see the core growth is much over the market. And we have done this part of seeing what has degrown. But if you also remove the bulky business, growth is very comfortably over the market. I think someone, correct me if it is wrong, the market grew in the second quarter at about what?

4% and [ degrew ] 11%.

11%. Yes. So our growth is about what?

3x, more than 3x.

3x the market. So I think it is wrong to see it from a perspective that degrowth is happening. Again, if you look at it, the Government Health business has shifted to October booking, which was last year booked in this quarter. If you add that up, our growth, again, is very comfortable for the half year and for the quarter. It is at least like Sreeni mentioned about 250%, 300% market growth, which would be there. So I don't think that there's any degrowth happening anywhere. What you're seeing at a micro level degrowth is what we are doing willingly. If you look at the TP degrowth that we see, commercial lines of businesses, there's no TP price hike happening for the past 3 years and their combined ratio is shooting up. So we have reduced our exposure there. If you look at, let's say, the Retail health, we're growing at market because again, the Retail health combined ratio for the industry is under stress. So we are not really getting very aggressive there on that basis. Crop, if you look at, there has been about a 50%, 40% fall in prices in crop for the market. So obviously, we have more reduced exposure. Now if you see, this has been a strategy for 23 years. It's nothing new or a surprise; we've been consistent with this. Where we see stress in the markets, we reduce exposure. Where we see opportunity, we'll increase the exposure. That is why if you look at our combined ratio, which has always been among the best in the industry. And if you look at our ROE, too, in the business, return on equity, you see we have excess capital. Our solvency is highest at 300% plus. If we remove the excess capital, and let's say, take it 200%, now even 150%, you take it 150%, our ROE would be touching 30%. At 200% of solvency, which is still better than most, our ROE is clearly over 20% consistently. So we have a business which is delivering an ROE, which is clearly on the higher side of 20% consistently without the excess capital. It is a business, which has been able to be agile, to be able to manage in terms of opportunities. And still the growth is much over the market. So that is what the summary is of the current scenario. I hope that will answer your question.

We would be comfortable with the Government Health side of the business, what has been our experience, obviously, you said it is getting deferred to the...

As I said, I never give you in calls micro numbers. But broadly, as I said, if you look at the combined ratios as a company, it will still be among the lowest in the industry and the ROE over 20%, if I remove shareholders. So as a company, we do business that really has strategic importance for a long-term growth of the company and we look into that.

Just to add on what Tapan said, I think for the risk of repetition on previous calls, the P&C business is a business of how do you manage your risk across P&C. And within that, in India, particularly, we have different types of businesses that are retail business, that are government subsidized businesses, that are group businesses, and this is when the big tactical element as well because the market is very dynamic, the pricing changes very dynamically. And therefore, how fast you adjust, and how you hold on to your basic risk parameters is what defines a good company, and that is what we try to do all the time.

Right. And any sense on the TP price hike? It's been almost the third year now, no hike from the government. So any sense what and when is there any possibility of TP price hikes, we are representing?

We should not be blaming the government, and I don't think that's right thing. See, the process of TP price hike is data is sent from the industry to the regulator. Regulator looks at it. And if the regulator feels that there's merit and they look at the micro level of the increase in certain section and decrease also in certain section and they recommend it to the ministry and on that, the ministry looks at the merit and then takes a call. I mean this is the process. It's a really transparent process if you look. The industry has represented to the regulator. The regulator would be seeing. If they find merit in it, they would push it. So that is how the process gets done. From an industry perspective, there'll always be representative, but the regulator look at the overall environment of the price, of the commission, of the combined ratio and then see where the merit would be. And then they'll recommend on that basis. So it's a process. As of now, I think for the past few years, they did not see merit in the increase and especially what's happened this -- in the industry as recommended. Let's see how it goes.

The next question is from the line of Mahek from Emkay Global.

So two questions. First, on the motor side. So the motor business has been growing at a slow rate. So any outlook on the second half of the year? And any change in strategy, which would be in the motor segment going forward? And secondly, I mean, how are the trends in the motor OD in terms of renewals versus the new auto sales, which is being done? And my second question would be for BALIC. So in BALIC, the group protection segment has grown by 25%. So just wanted some color on how the credit life and GTI businesses are performing for the H1.

So if you look at the motor business group, see, as I mentioned previously, the commercial vehicle, with the stagnation in TP price hike and if you look at the frequency of accidents happening, has moved up in terms of the TP assets compared to the time when COVID was there. And in fact, pre-COVID, also was moving up. With the frequency going up, this is actually moving up on commercial vehicle space. That's why we have, as I mentioned earlier, slowed down our exposure in that line of business. Now if you see a price hike coming in, then obviously, our strategy would change. If we don't see, then we would be cautious in that business. And that's why you see our growth lower than the market growth in motor. But as I said, this is fine with us. We do it for so many years. If we find some business doesn't make economic sense, then we slow it down. And if it makes it, then we increase it. So the future statements depend on do we see a price hike or we don't see a price hike in terms of what we see within the motor. Over to you Tarun for the life question.

So the question is around the group life side, the credit life side, particularly. So I think directionally, we have been commenting on this every quarter that particularly last year, all quarters, we were focused on de-risking ourselves because we largely used to work with 2, 3 partners, and they used to consume a big part of our share. That had the task for us this year is, will remain that we get on to more lines of credit life business and get more and more partners onboarded, plus that we can diversify ourselves. As a result, I'm happy to say that today, we have about 80 partners. And within this, about 22 banks with who we are already on the credit life side. But having said that, there has been -- while we've grown, because of a smaller base last year, the color is different shades within this business. Some of the profitable parts of the businesses have degrown and some of the businesses which consume a little bit more time in growing and of course, may not be as profitable as the rest are growing faster. Hence, this balancing act will -- this balance will emerge as we go. As you may be aware that the credit life businesses for most insurers have slowed down, but I won't really jump in joy for the growth that we've shown here because of the base effect. I think we are just getting back to where we ought to be. On the whole, there is a lot more competition emerging in the credit life side. And as a result, margins for credit life will remain to date as we go by.

Just a follow-up for Tapan. Just wanted to know how are we doing in the Motor OD segment, the renewals versus the new car segment?

It has been consistent. I think we improved on that. But again, if I look at the numbers from an industry perspective, we would be among the best.

The next question is from the line of Supratim Datta from AMBIT Capital.

My first questions are on the BAGIC business. So Tapan, you highlighted the challenges in the Retail health segment. Just wanted to understand if you could elaborate that what are the real challenges in this industry, and how do you see these challenges being resolved going forward? That would be my first question. And a second part of this would be if you could split the loss ratios in the health segment between Retail group and Government, that would give us some clarity about how things are moving in the segment. Now the second question on the BAGIC business was, again, on the motor side. I understand that you have done fairly well on the motor business. You were early in the CV business and now you are slowing down there. But overall, the outlook for the CV segment as well seems to be weak based on commentary from some of the OEMs in the second half of this year. So in this scenario, how do you see this book growing going forward? And what could you do to offset the slowdown? Is there opportunities for market share gains or some of the share gain in certain OEMs? Just if you could give some color on that, that would be very helpful. I have a few questions on BALIC, but I'll get to that after this.

Your final question, I'll explain the different portfolios and the strategy behind that. But my humble request, and I have said this on the previous calls also and this call also is, don't ask questions on micro level of claim ratio bifurcations. Those, I would restrain my comment on because the business is strategic. And now when you start giving micro level claims ratio, it opens up to the entire market. And that's what I have never in the past also done that, nor would I do that. Whatever is available in terms of the loss ratio, the intent is public disclosure of the GI business. I think if you look at it, go to the website and get that. But now let me come to the Retail health and the challenges in Retail health. So if you look at health, and this is globally a phenomena of the health business and India specifically. So the outgo happens at hospitals, and hospitals are not regulated in the Indian context. The inflation on the expenses at a hospital level, medical bill inflation and you all are aware about it, moves up much faster than the price which gets built in, in the Retail health portfolio. And they're also quite a bit broad, which keeps on happening in this space. Now if you increase the price too dramatically, then it hurts the end consumer because unlike motor, whereas a vehicle ages, your insured value comes on, so the price actually comes on; in health, as a person ages, the price starts moving up and the inflation also happening starts moving up. So the price is a very sensitive to part of the health portfolio from a customer perspective and rightfully so. While the problem in outgo is that you have a medical inflation, which keeps on moving much faster than the pricing which gets done and you also have products happening. So the way the industry is trying to handle this is two pronged. One, a health exchange is being set up with the government, NHS in process. Every insurance company has plugged into that health exchange. And hospitals are a bit reluctant to plug in as yet, but talks are with them because that will bring in transparency in terms of claims. So the industry wants to pay claims as soon as possible, immediately, but the transparency of the documents or the procedures they put on exchange, so there's a flow of claims happening. But there's reluctance from the hospital as of now, but conversations are on to see how do we get them on board. So that would, one, bring in more transparency to the system, which would be better in terms of overall seeing how things move. The other issue would be if you look at in terms of the expectation from the customers and the regulator to the industry is that you should be covering everything, every possible means of treatment, any means of different segments of the society and nothing should be missed out. And you should be serving the customer in a way that they have the least of difficulty, which is a very fair ask from the regulator. But even if you put all that together, there's also cost of servicing to the customer, and that also moves up in terms of costs that the companies bear. So when we put all this together, it is not something which you can easily say that it will, at any point in time, be able to generate a substantial amount of profit in terms of the business, which has to be. But it is a substantial amount of business, so you have to be there and you have to make yourself more efficient, much more better in terms of servicing a customer and build a good brand. So overall, this is a summary of the Retail health that you asked me in terms of how it is and the challenges, which are there, and how the companies have to keep on, overcome it at a company level, at an industry level and to be able to provide very good service to the customers in terms of -- this will be a sensitive portfolio. It affects the individual in terms of their own health and also you have to be very sensitive toward that and provide the best too. If you look at Bajaj, we're the first to set up RMs at hospitals, people standing there for a customer to take care of them. When somebody would really get confused, some of the major hospitals put people there. We're also looking at the full RM servicing the customers. We also came out with very interesting products for senior citizens, which actually had and has a provision that there's variable data. If somebody falls or it's an emergency case, that we send ambulances over, get them picked up, take them to hospital, we have green channel there, get them treated and get them back. We also came out with global health cover that -- it is not that if you are getting treated in India, we will restrain yourself only to India. You can get treated anywhere in the world. So we have done a lot of innovation, and we're trying to bring the best product. And look at interesting businesses, the models in which we try to see that it is not only just pure paying claims, but also ensuring that we are able to take care of the customers beyond than take care of emergency of a customer. So it's a constant improvement and a constant push, but this is, in short, the Retail health. On the motor, your question was? Sorry, I missed that.

So I was asking about the second half, how are you looking at growth given some of the commentary from OEMs suggests that it's going to be...

That is why if you look at motor growth, overall, the industry has come down. So you have rightly seen. The sale of the vehicles have been down, and that has an impact in terms of the growth of motor business you get. And as said, if the TP decides it does not happen and with the inflation of costs in terms of TP and others moving up, that actually is the reason why we have to still look at segments, which make sense and be there. So you have rightfully seen that, and let us see how the second half builds up. Right now, there is a stress on the sale of new vehicles happening. But as a company, we have a substantial share in the new vehicle sales. So I don't think I would see a huge difference from the current level of growth, which is happening, either plus or minus. But that is a forward-looking statement. It does depend on how things move on TP price hike, how does the sale of vehicle moves up? It is subject to sort of these parameters for the second half of the year.

Got it. Tapan, thanks a lot for the detailed explanation on the Retail health side. If I could just ask two follow-ups here. So one is, do you see a need for different structures to emerge on the retailing side in terms of products, maybe something like a Kaiser Permanente, which is there in the U.S., some kind -- that kind of a model to get better value distribution between the insurance company and the hospital? And two would be, do you see GST -- there is talk around GST rates coming down. Would that be a relief enough to really drive growth or make this product a bit more attractive for insurance companies as such?

GST will play a role and that has been the demand in the industry a long time. And we're actually seeing positive feelers at least on the senior citizen and on the low sum insured coming right now. But let's see how it emerges, which I believe is good. At least for seniors, it really is because I think it helps -- it gets more expensive as you age. So GST relief at the senior citizen would actually make a huge difference because as that is where the health requirement is very high also, and we are focusing on that. And to your point, health business will emerge. It is in a constant state of churn, and we are seeing some good models of either Discovery in South Africa or to some extent, part of the U.S. models is there. This churning will keep on happening and evolution will happen in the health portfolio, but one has to build it in a very long-term basis. In motor business, you can say no to a renewal. In health, by regulation, you can't say no to a renewal. So you have to be very cautious of building a very good book, which sustains and stays like forever with you kind of stuff.

Got it. Just one question on the BALIC business, I understand that you will have grown very strongly this quarter. But given how the markets have been over the last 15 days and considering that some of the commentary from some of the consumer company credits and there is steps building in the middle-income households. How do you see this unit growth sustaining going forward? And if it does not sustain, then how comfortable are you that to shift this growth to other products, if you could give some color on that, that would be really helpful.

Right. Well, it's a good question. Yes, last quarter has been an abnormally good month in terms of top line. And hence, when top line comes with easier selling products, they do lead to a bottom line hit. So I'd be happier if we got a more balanced product last quarter. What you see is that we've been working on our product mix trying to get it balanced all the way through. Broadly, if I was to indicate the ballpark of ULIP, the way it has changed the market, so in the markets, the BSE SENSEX crossed 82,000; our ULIPs were moving closer to a very high level of almost 16% of our product mix. And this, when we retrained our teams, got them focused on a broader set of customer needs and we were able to actually control it, if I can use the word control, but I believe, balance is the best word here, to what remains our usual mix. And if you go back and look at how our quarters will move or how the years land up us ending, we land up balancing a product mix over a period of the 4 quarters in a year, but we do let customers and distributors tell the flavor of the month. And as markets are now kind of cooling off a little bit, we will be back to a predominantly traditional product mix. That's where BALIC has always been. BALIC is largely a market leader in the mid-segments already. Yes, I have been listening to the commentaries that there is an issue around the mid-segment. But at the same time, if you look at the way people have money in hand to spend, the way other indicators are moving, it's a mixed bag. I don't think it's a clear indication that people are kind of cash strapped because spending on homes has gone up. Stamp duties have been higher. You see middle class coming out and spending a lot more on travel. So it's not that there is -- we are seeing any significant risk there. And our products usually are well-thought through. It's a very high evolving product and do remain resilient to -- we announced to minor volatility of such bits. This would largely spin out more from the credit life business, but not necessarily in the long-term saving plans. Hence, we don't see an issue there. I think what you will see is our mix getting more and more balanced to what we are usually accustomed to have. And last year, this quarter 1, where we had a significant ULIP, this time, it's been quarter 2, but good thing is the best quarters of the year are yet to be kind of pronounced in the coming in. And as our mix balances out here, overall, I think the year should be a lot more comfortable. And we don't have an issue on demand on longer-term traditional plans because traditionally, that is what the BALIC has been known for anyways.

Got it. Just one question, although by these additional products, we'll become larger in the second half is what I understand, but there is also an impact from surrender charge -- higher surrender charge and renegotiation of some of the commission contracts with your partners. So if you could give some color on that, how do you see that play out? What would be the impact on the higher surrender value? And how are negotiations with your partners going ahead, that would be helpful. So that's last one.

Yes, that's a fair question to ask at this juncture. See, surrender value, yes, did put us in a tizzy, I'd admit it, and has also put distributors in a tizzy because it's more than anything else because of surrender value, the cost of distribution, the cost of commissions have to come down. Only then can -- they have to plateau out in such a way that the first year's commissions have to come down. I think the distributors have been quite in sync with manufacturers, and they realize this and the fact that this was going on for almost like 6 months of discussion. This has already seeped into the bloodstream of the sectors, and it had its time. So while there is some small aberrations here and there, but largely, most distributors have either taken a commission cut or a deferral. And I'm not just saying it for BALIC. I'm saying it for the entire sector. BALIC, of course, has led also from the front as always. And it is kind of getting share, this entire bit is getting shared. And as we go ahead now, we will see more and more, I'd say, plateauing out of commissions relatively, and that should help persistency because you get your second year, third year higher commissions versus what they used to be earlier, only if you are more persistent. The more persistent you are, the lesser the probability of surrender. Hence, I think it has relatively been a very well-informed date. I'd also like to thank the regulator that they could come up with this. And because it was largely publicized, distributors have basically been in sync with the manufacturers as well.

The next question is from the line of Dhaval from DSP Mutual Funds.

A couple of questions. Sorry, I missed the opening few minutes of Sreeni's commentary, but just on this news flow around Allianz looking at exit. Just I wanted to understand how are we thinking about sort of this event in terms of, let's say, if we were to buy funding of this event? I mean, some perspective around that would be useful. How are we thinking about it? And then the other question was relating to the Life Insurance business. Directionally, not maybe near term, but just directionally, we wanted to get closer to the listed peer group in terms of VNB margins. I mean I just want to get some perspective that maybe our pace of change may have got derailed in the current year with the product mix and the regulatory changes, et cetera. So is that still on track in the next 2 years or so FY '27? Do you think we will be getting there? Or there is any change to that thought process? Yes, those are the two questions.

I'll take the first question. I think you -- as you correctly said, you missed my opening remark, in which I had said that we have made an announcement. It is Allianz's decision to exit. They have informed us. Beyond that, we have nothing more to communicate at this stage. So there is no further questions that we'll take in this call as well. Your second question, I think Tarun will take it.

Yes. So another good question. I'd say that, yes, some relating for a quarter or 2 here and there, should be the only outcome of this because like launched in the previous one, distributors have realized that this is a situation where they'll have to bear as much of the brunt as the manufacturers are, and there have been multiple actions we've taken. So that should ease the impact. Yes, directionally, we are committed to moving our NBM margins or when normally we look at VNB because NBM margins do not capture the entire as such. The NBV is what we look at, and that is what you will see pulling in direction. A slight, I'd say, aberration for the quarter because -- more because of ULIP, not because of surrender value piece last quarter. But the trajectory remains up, and we should be -- we are in shape to start moving in the direction of the rest of the companies, among the top 3 or 5 companies that have been. And you will see us getting there because traditionally, as you may have seen, BALIC is a turnaround case. We have moved in from single digits to double digits already and now we are in the mid-teens. And nobody is more keen than the team and me to ensure we get to where the rest of the players, among the top cohorts that we have, the one we compare ourselves with. We are committed to getting there.

And sorry, Tarun, just if I may take a follow-up on this one. So like the market share change that has happened over the last few years, now we've got to a particular size, I mean, in terms of like a rolling 12-month AP market share would be about 5% plus. So from that perspective, the incremental pace of market share change may moderate, and we are seeing that in terms of the -- the steepness of the market share gain has started more moderating. So how do you insulate this current position and then ensure that the gains still continue? Because historically, we've seen in case of some of the other companies like Tata AIA or Kotak and even in Max, they get to this point and then they start sort of losing ground, and then again, there is 1, 2 years of correction. So just on growth to ensure that this VNB margin comes through, how are we sort of looking at navigating this size and ensuring that we don't falter on that?

So it's not about -- first of all, I must comment that I think you've done your homework quite well. And yes, other companies would have moved laterally and not necessarily the steepness would have continued. One need to understand that steepness is also a base impact, right? So when we were small, it was steeper. If you look at the number of thousands of crores we had, possibly that would remain similar. And hence, percentages maybe not -- percentages growth may not always remain the same as the size gets to be larger and larger. What we are committed to is, how is this market share coming? Is this coming from the more profitable products and more customer-friendly products? And are we growing our base of customers? Are we -- is that distributor capability enhancement in the right trajectory? We have all these input parameters that if we monitor, directionally, we shall remain only positive. The pace of growth of top line is essentially an outcome of all these things taken in conjunction, and you shall see that. Like for example, I am -- why the numbers say what they say, I'm particularly very happy to let you guys know that we are now the third-largest company in the life sector in terms of the number of policies we sell in the private sector. So we are punching way above our weight class there. And that gives us capability to upsell. As you know, Bajaj Finserv group is particularly known for such capability. And this is what we are always enhancing, that are we getting into more households, are we getting into more cities? Are we adding more distributors who are active? How does the quality of sale go? Because all of these, if they are there, directionally, the growth shall remain. Trajectory will be positive. We've always committed that we'll be twice the growth rate of the industry and which is what we've always been mostly more than that. But it is important that with that, the bottom line also moves faster, not the way it has gone this quarter, but faster than the top line.

The next question is from the line of Prayesh Jain from Motilal Oswal.