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Insurance comes home; multiple growth levers ahead

We hosted the management of Bajaj Finserv (BJFIN), including Mr. Sanjiv Bajaj – Chairman and MD, for a non-deal roadshow in Singapore and Hong Kong. The management articulated its ambition of making BJFIN a financial-life-cycle partner for Indian consumers, supported by its large customer franchise, distribution and technology capabilities

* The philosophy remains firmly centered on quality of growth over headline market share, with each of the group's large businesses either gaining market share, improving profitability, or both, while the newer businesses are steadily moving towards breakeven. This should result in more sustainable growth and better earnings quality across the portfolio.

* Bajaj General (BGen) is willing to sacrifice near-term volume where pricing is uneconomic. Despite this, the company has steadily retained market share and maintained one of the industry's best combined ratios over the years. Its ability to retain market share without compromising underwriting profitability in a challenging market serves as a key long-term differentiator. ? Bajaj Life (BLife) has fundamentally improved the quality of its business mix from being heavily dependent on thinner-margin ULIPs toward protection, guaranteedreturn products and annuities, making the franchise more margin-accretive. This would support VNB margin expansion alongside the re-acceleration in growth.

* Health, Markets and AMC are all growing while narrowing their losses, and management expects these businesses to progressively benefit from scale. These newer businesses are increasingly becoming potential contributors to consolidated profitability. Management is also looking to enter wealth management and pensions, broadening BJFIN's addressable financial-services opportunity.

* The Board has approved the establishment of a reinsurance business, which will initially target India and potentially expand internationally once scale and credit ratings are established. While this is unlikely to materially affect near-term earnings and will require capital, it reinforces the broader strategy of building capabilities across the financial-services value chain.

* The group has been consistently increasing use of AI across customer acquisition, servicing and credit delivery. Notably, AI-enabled voice and chat interactions generated ~INR55.2b of loans at Bajaj Finance in FY26. Management is now focused on deploying AI at scale to improve operating efficiency and customer experience rather than treating it merely as an innovation initiative.

* On succession, the group’s approach is measured and well-planned rather than event-driven. BJFIN is investing in building a strong, empowered layer of business CEOs over time, so that leadership transitions can happen smoothly.

* Valuation: Backed by its rich legacy, BJFIN is now entering the phase of balanced value creating, with BAF set to drive earnings growth, insurance businesses shifting toward higher-margin-led profitable growth and new digital businesses steadily improving their path to scale and profitability. Execution across the lending, insurance and digital ecosystem is improving, enhancing visibility on consolidated earnings and intrinsic value compounding over the medium term. The company’sstrong balance sheet provides headroom for more initiatives like alternates, reinsurance, etc. We maintain our BUY rating with our SoTP-based TP of INR2,490.

FY26 highlights

* BJFIN delivered its best-ever performance in FY26 with consolidated revenue at INR1.5t (+13% YoY) and PAT at INR98b (+10% YoY). The defining event of the year was the buyout of Allianz SE’s 26% stake in both life and general insurance for INR242b by promoter-group entities, making these businesses wholly owned subsidiaries.

* BGen (22% of revenue) witnessed tender business-led drag, with policy sales falling from 48m in FY25 to 37m in FY26 and GWP growth at 8% YoY (+12% YoY ex-crop and government health). The insurer is well positioned to achieve mid-teen FY26-28 earnings CAGR, supported by stable market share (7.1%), best-in-class underwriting (CoR at 102.8%) and robust capitalization with solvency at 300%+.

* BLife (22% of revenue) reaped fruits of Bajaj Life 2.0, with VNB margin expanding to 19.2% in FY26 (14.5% in FY25), backed by product mix shift to non-linked products. Retail APE growth is expected to normalize to midteens (6% YoY in FY26), supported by a diverse distribution strategy. Product mix shift should continue to aid VNB margin expansion, along with mid-teen operating RoEV.

* The three emerging businesses (healthcare, markets and AMC) generated ~INR15.5b of revenue against ~INR5.4b of combined losses, but consume under 1% of group capital employed. While all businesses are scaling up rapidly, they are still at a nascent stage with capped downside, providing strong optionality for diversified growth.

* BAF dominates the P&L (50%+ of revenue and 95%+ of PBT), achieving the milestone of the INR5t+ loan book in FY26. Strong customer acquisition, deepening digital ecosystem, continued geographic expansion and a wellcapitalized balance sheet position the company well to sustain strong loan growth (25% FY26-28E CAGR), supporting healthy NII (23% FY26-28E CAGR) and earnings growth over the medium term (30% FY26-28E CAGR).

* In Dec’25, the group committed to becoming a 'FinAI' enterprise, with management guiding cost and productivity benefits over 12-18 months (IT spend +20% YoY in FY26). ~INR450b of surplus capital sits above regulatory requirements across subsidiaries, providing an opportunity to invest in alternatives, reinsurance and other diversified revenue streams within the financial ecosystem.

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