Update on the Indian Equity Market:<\/p>\n
On Friday, Nifty closed with 2.3% gains at 11,050. Within NIFTY50, BAJAJFINSV (+6.6%), HCLTECH (+5.3%), and CIPLA (+5.1%) were the top gainers, while SBILIFE (-1.1%), BPCL (-0.9%), and UPL (-0.6%) were the only losing stocks. All the sectoral indices ended positive withIT (+3.5%), MEDIA (+3.4%), and AUTO (+3.4%) gaining the most. <\/p>\n
All three companies- Finance, Life and General Insurance growing well\u2013 Bajaj Finserv<\/p>\n
Excerpts of an interview with Mr. Sanjiv Bajaj, Chairman and MD, Bajaj Finserv (BAJAJFINSV), published on ETBFSI website dated 23rdSeptember 2020:
\n\u2022\tSeven or eight years ago, the life insurance company (BALIC) and general insurance company (BAGIC) contributed to around 75-80% of Bajaj Finserv\u2019s consolidated profits. BALIC contributed the largest, followed byBAGIC, and the least contribution came from Bajaj Finance.
\n\u2022\tThis has changed significantly since then. Today, Bajaj Finance is the largest contributor to consolidated profitability, followed by BAGIC and BALIC respectively.
\n\u2022\tBajaj Finserv owns 74% of the two insurance companies and a little under 52% of the finance company. So the proportion of the profit pick up ends up being different.
\n\u2022\tAll three engines are growing well so the shareholders get a diversified mix of profits from these companies.
\n\u2022\tCompanies under the Bajaj Finserv umbrella have become even more digital than before. Management has plans for the businesses to come out stronger, better and to provide a set of solutions for customers keeping in mind lessons learnt in this crisis is what the customers need.
\n1.\tBajaj Allianz Life Insurance (BALIC)
\n\u2022\tLife insurance is a peculiar business in the sense that when it is growing fast, the business burns more cash upfront in the form of commissions and expenses. But the company earns premium over a period of time and makes profits in later years. On the other hand, through slow growth years, the opposite happens and the profit goes up.
\n\u2022\tPost the difficult lockdown phase, BALIC\u2019s premium collections have come back to 80-85% of pre-COVID levels.
\n\u2022\tThe two insurance businesses are distributed very well through the country. As a result the recovery is quite good because recovery outside of the top 10, 20 cities has been very strong.
\n2.\tBajaj Allianz General Insurance (BAGIC)
\n\u2022\tBajaj\u2019s market share within general insurance companies is between 6.5% and 7%. Bajaj runs a diversified set of business lines, and most of these lines have market shares which are more or less around the 6.5%-7%`range.
\n\u2022\t The market share also varies year on year based on changing competition and market opportunities.
\n\u2022\tBajaj may not be the cheapest policy issuer but is quick, fair, and transparent not only in policy issuances but also in claim handling.
\n\u2022\tIn the case of crop insurance, it is about 6.5-7% of Bajaj\u2019s mix of the overall industry\u2019s share. There are two main seasons -kharif and rabi \u2013and the share of this business line in Bajaj\u2019s business depends on what the dynamic is in that season. But it normally evens out over a year.
\n\u2022\tIn terms of uptick in motor insurance, the picture is still not very clear. There is growth due to pent-up demand and further growth is expected due to the upcoming festive season. But what will happen post that towards end of FY21E is unclear.
\n\u2022\tThe demand is still interwoven with the impact of the pandemic on local lives. Bajaj saw good growth in June. But July and part of August were terrible because of local lockdowns.
\n3.\tBajaj Finance
\n\u2022\tDue to the local lockdowns in the last few months, the business in top 20 cities got severely impacted.
\n\u2022\tBajaj Finance got impacted more compared to BAGIC and BALIC as it has a large percentage of business coming from the top 20 cities. But things have been getting better from August.
\n\u2022\tOver two-thirds of the borrowers, who took the moratorium, had never bounced with Bajaj Finance earlier. That means they were conserving liquidity.
\n\u2022\tAlmost 30% of the book took a moratorium in the first couple of months. It came down to the low teens in the last two months. As people got more confident and as the cities and businesses started opening up, they started paying as well and that is a very good sign.
\n\u2022\tEven though things are moving in the right direction, the situation is still unpredictable. Bajaj Finance continues to be extra conservative, has stocked up on liquidity and continues to make additional provisions.
\n\u2022\tBajaj Finance also remains conservative in incremental lending and will go back to growth when things start to improve. <\/p>\n
Consensus Estimate (Source: market screener and investing.com websites)
\n\u2022\tThe closing price of BAJAJFINSV was \u20b9 5,784\/- as of 25-September-2020. It traded at 2.6x\/ 2.3x\/ 2.0x the consensus BVPS estimate of \u20b9 2,188\/2,478\/ 2,873 for FY21E\/ FY22E\/ FY23E respectively.
\n\u2022\tThe consensus target price of \u20b9 7,248\/- implies a PB multiple of 2.5x on FY23E BVPS of \u20b9 2,873\/-.<\/p>\n
Disclaimer: \u201cThe views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Update on the Indian Equity Market: On Friday, Nifty closed with 2.3% gains at 11,050. Within NIFTY50, BAJAJFINSV (+6.6%), HCLTECH (+5.3%), and CIPLA (+5.1%) were the top gainers, while SBILIFE (-1.1%), BPCL (-0.9%), and UPL (-0.6%) were the only losing stocks. All the sectoral indices ended positive withIT (+3.5%), MEDIA (+3.4%), and AUTO (+3.4%) gaining […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[385,101],"tags":[],"_links":{"self":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1391"}],"collection":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/comments?post=1391"}],"version-history":[{"count":1,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1391\/revisions"}],"predecessor-version":[{"id":1392,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/posts\/1391\/revisions\/1392"}],"wp:attachment":[{"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/media?parent=1391"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/categories?post=1391"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.assetmultiplier.co.in\/blog\/wp-json\/wp\/v2\/tags?post=1391"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}