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H2 recovery in focus; margin expansion expected

H1FY27 APE grew 11% YoY led by robust annuity/ PAR growth; however NPAR continued to decline in Q2 due to a high base effect. Management remains focused on expanding its protection and retirement segments while strong growth in newer partners and online channel offers a runway for diversification in distribution. We tweak our APE growth estimates to 15%/16% for FY27/FY28E factoring in softer H1 performance and a high base in H2FY26. Q2 VNB margin expanded to 27.0% driven by a favourable product mix. We raise our margin estimates to 25.5% for FY27/FY28E on account of higher contribution from margin-accretive products and operating leverage benefits. We roll-forward our valuation to FY29E and value MAXF using the Appraisal Value framework at 1.6x FY29E P/EV (vs. 1.9x earlier), arriving at a TP of INR2,025. Reiterate ‘BUY’

Annuity/ PAR drives growth; growth recovery in H2 is key: Q2 APE grew by 8.3% YoY to INR27.2bn, led by annuity (+119% YoY), PAR (+20% YoY), ULIP (+12% YoY) and protection (+9% YoY). NPAR declined 40% YoY, reflecting a high base and a potential shift towards annuity products. The newly launched product - Smart Rise gained traction, contributing >50% of Q2 annuity business (~8% of APE). Rider attachment stood at 39% in H1FY27; however, growth in ULIP-linked rider attachments was in low single digits amid softer ULIP demand. H1FY27 APE grew 11% YoY to INR46.4bn. Management remains focused on expanding the protection/ retirement segments and expects APE growth to accelerate in H2FY27. PAR/ NPAR/ ULIP/ Protection/ Annuity comprise 13%/ 14%/ 36%/ 18%/ 19% of Q2 APE. Despite sustained momentum in annuity/ PAR, we build an APE growth of 15%/16% in FY27/FY28E, factoring in weak NPAR volume and a high base of H2FY26.

VNB margin expands; favourable mix to support sustainability:

Q2 VNB recorded a growth of 15% YoY to INR7.3bn while VNB margin expanded ~154bps YoY to 27.0% driven by a favourable product mix. H1FY27 VNB grew 21% YoY to INR11.8bn with a margin of 25.4% (vs. 23.3% YoY). Management expects margin to improve further in H2FY27, with FY27 margin guidance tilted towards the higher end of 25-26%, supported by operating leverage as business volumes build up. Given the broadly similar margin profile of annuity and NPAR, the decline in NPAR had limited impact on the overall margin. We raise our VNB margin estimate to 25.5% for FY27/ FY28E as the share of nonULIP products increase

Cost efficiencies support EoM compliance; capital position comfortable: H1FY27 policyholder opex to GWP ratio improved to 13.7% (vs. 15.5% YoY) led by productivity gains and operational efficiencies while EoM stood at ~25%. Company remains confident of meeting the proposed EoM guidelines of 15%/12.5% within 2/5 years respectively, targeting 5-7% optimisation through commission realignment/GST adjustments and 2-3% savings from operational efficiencies. Embedded value grew 17% YoY to INR314.4bn while operating RoEV stood at 17.3%. While longer term persistency continued to improve, 13M persistency dropped to 83% for 5MFY27 (vs. 85% for 5MFY26) reflecting the residual impact of a NPAR product. Management expects the cohort to improve over the coming quarters. AUM grew 11% YoY to INR2,056.6bn with solvency comfortable at 197% supported a by debt raise of INR6.9bn in Sep’26.

Diversification across channels to support growth: Proprietary and partnership channels contributed 47% and 53% of Q2FY27 APE. Proprietary channel grew 10% YoY led by strong online growth of 29% while offline channel remained muted (+1% YoY). Partnership channel grew 7% YoY, with Axis Bank growth subdued at 4% YoY due to soft ULIP demand and delayed launch of a new protection product. Other partners grew 21%, reflecting increasing distribution diversification. Axis Bank’s counter share moderated to 62-63% in Q2FY27 vs ~65% and management expects a healthy recovery in the Axis Bank channel in H2FY27, supported by improving business indicators and transformation programs. We believe newer partners and emerging channels provide a meaningful runway for growth, reducing dependence on Axis Bank.

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