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GODIGIT’s Q1FY26 performance was a mixed bag, with elevated CoR at 108.6% (up 3.2ppt YoY; Emkay:103.9%) driven by higher commission ratio, whereas PAT at Rs1.38bn (up 36.5% YoY) was higher than our estimate of Rs1.17bn led by higher investment income. GODIGIT logged a strong 21% GWP growth in the Motor TP segment led by robust growth in the mandatory 5Y 2W policies, thus driving higher commission ratios. Owing to higher cessation and increased share in the Fire segment, GODIGIT’s net retention ratio fell to ~65% during Q1; however, the management expects it to increase to ~80% during FY26. The management continues to favor an opportunistic growth strategy amid a challenging environment. To bake in the Q1 developments, we tweak our FY26- 28 estimates which leads to broadly unchanged CoR and a ~3-6% increase in PAT. We reiterate SELL on the stock and revise-up Jun-26E TP by ~7% to Rs290 (from Rs270).

Higher Commission Ratio drives elevated CoR

During Q1FY26, GODIGIT logged 12% GWP growth at Rs29.8bn, largely in line with our estimate. However, lower net retention ratio at 65% (-10.8ppt YoY) resulted in lower NWP at Rs19.5bn (-3.8% YoY) and stood lower than our estimate of Rs26.3bn, driving NEP at Rs18.7bn vs our estimate of Rs21.3bn. Claims ratio at 70.3% saw marginal YoY improvement and slightly missed our estimate of 70%. However, driven by strong growth in the 2W Motor TP segment, commission ratio rose to 29.3% (+3.9ppt YoY) and was significantly higher than our estimate of 25%. Expense ratio at 9% saw 60bps YoY improvement and largely met our estimate. Resultantly, CoR at 108.6% was significantly higher than our estimate of 103.9%. Despite the elevated CoR, PAT at Rs1.38bn (+36.5% YoY) beat our estimate of Rs1.17bn, owing to higher investment income.

Navigating through a difficult external environment for general insurance

Amid a challenging environment, the company is still in favor of an opportunistic growth strategy. While the company saw a reduction in the Motor TP business in the earlier quarters, it tracked strong growth in the Motor TP segment on the back of robust growth in the mandatory 5Y 2-wheeler policies which also resulted in higher commission ratios. Further, the pricing improvement in the Fire segment resulted in a strong ~40% GWP growth, though net retention ratio fell during the quarter. Increased competitive intensity and pricing aggression resulted in slowdown in the Group Health segment. The management continues to look for opportunities in the Motor TP segment, while growth in Group Health will revive with the market seeing price discipline.

We reiterate SELL with revised up Jun-26E TP of Rs290

To reflect the Q1 developments, we tweak our FY26-28 estimates which results in broadly unchanged CoR and increase of ~3-6% in PAT led by higher investment income. Given the challenging environment, we see the company’s selective and opportunistic growth strategy causing limitations in delivering superior growth and profitability that can justify the premium valuation at which the stock currently trades. We reiterate SELL on the stock with revised up Jun-26E TP of Rs290 (from Rs270 earlier).

Earnings Conference Call Highlights

• Net retention ratio declined to 65% during the quarter, on account of higher share of the Fire segment in the GWP mix as well due to higher cessation.
• Underwriting of large corporate businesses resulted in lower net retention ratio. However, the management expects the net retention ratio to increase to ~80% for FY26.
• The management plans to have the highest retention in the Fire segment. It mentioned that maximizing Reinsurance Commission is not the strategy of the company.
• Commission Ratio has increased on account of underwriting the 5Y Motor TP policies in the 2W segment. Overall, the 2W component has increased to 31% in the Motor mix.
• The management mentioned that commissions are quiet high for the Motor TP business of small good carrying vehicles, school buses, and auto rickshaws. The >40-tonne goods carrying vehicles have seen slight improvement in commission ratios.
• A few Quarters ago, the company had reduced its market share in the Motor TP segment. In the last quarter, the company has gained market share in the Motor TP segment. The company will continue to look for opportunities in this business.
• The company would seek inward facultative businesses and reinsurance companies look more toward treaties. Hence, GODIGIT’s group company entering the Reinsurance business does not impact its business.
• There is no change in the Reinsurance Acceptance Strategy at Go Digit.
• Earlier, most of the business was from CVs; over the years, the company has reduced the share of CVs while increasing the share of PVs.
• When the company underwrites a comprehensive policy, the company looks at the Motor OD and Motor TP segments combined.
• Private players that were aggressive last year in the group health segment have not seen strong growth this year.
• While the number of quotes and premiums is increasing (for GODIGIT), the conversion ratio has decreased.
• The management mentioned that as and when market conditions improve, the company will track growth in the Group health business.
• The company has not underwritten any loss-making contracts just for the purpose of EOM.
• TP loss ratio has been in line with previous year trends. There has not been any change in the reserve release during the quarter.
• The management continues to underwrite the 2W business as it is profitable and offers an AUM that remains in the books for a longer period.

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