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Strong performance across subsidiaries

* Bajaj Finserv (BJFIN) reported consolidated revenue of INR420.4b (+19% YoY) and PAT of INR31.3b (+12% YoY) in 1QFY27.

* Bajaj General (BGen) reported 11% YoY growth with respect to GWP at INR57.9b (in line). NEP grew 20% YoY to INR26.7b (14% beat). PAT at INR4.8b declined 28% YoY (13% beat due to higher investment income).

* Bajaj Life (BLife) reported 30% YoY growth in APE to INR17.1b (10% beat). VNB witnessed strong growth of 87% YoY to INR2.7b (46% beat), resulting in a VNB margin of 15.9%, up 480bp YoY (MOFSLe of 12%).

* BGen is awaiting a normalization in trends before accelerating in the motor segment. BLife has achieved a sustainable product mix, with 22-25% in par, 22-25% in non-par, 45% in ULIP, and rising contribution from protection. Capital infusion will continue in Bajaj Finserv Health (BFH) for the next 5-6 quarters, while Bajaj Finserv Direct (BFD) will achieve breakeven in FY28.

* In BGen, we have largely maintained NEP estimates but increased our PAT estimates by 4%/6% in FY27/FY28, driven by stronger investment performance. In BLife, we have increased our VNB margin estimate by 50bp for FY27. On a consolidated basis, we have increased BJFIN’s EPS estimates by 10%/11% for FY27/28, given BAF’s strong performance.

* Supported by improving trends across its established lending and insurance subsidiaries, along with rising profitability in new businesses, we believe BJFIN is well placed to capitalize on the financial ecosystem opportunity. We recently upgraded BAF to BUY (Link) and are now upgrading BJFIN to BUY with a TP of INR2,490 (based on SoTP).

BGen - Pressure in the motor and fire segments

* GWP performance in 1Q rose 11% YoY, with the motor segment growing 8% YoY amid high competitive pressure. Retail health/group health maintained their double-digit growth trajectory, with GWP growing 34%/36% YoY.

* Motor continued to contribute the highest to the GWP mix at 32% in 1QFY27 (33% in 1QFY26), followed by the commercial segment at 25% (33% in 1QFY26). Health (retail + group + govt) contributed 31% to the mix, compared to 23% in 1QFY26.

* Brokers remained the largest contributor to GWP (49% in 1QFY27 from 55% in 1QFY26), followed by individual agents (15%, same as 1QFY26). Banca channel contributed 9% (8% in 1QFY26), aided by new partnerships.

* The claim ratio increased YoY to 74.3% (vs. 71.1% in 1QFY26) vs our estimate (70.5%). The rise in claims ratio was largely driven by an increase in the motor OD claims ratio to 76.6% (74.9% in 1QFY26) and the health claims ratio to 89.2% (82.8% in 1QFY26).

* Combined ratio at 104.7% increased 110bp YoY (vs. our est. of 102.0%).

Valuation and view

* BJFIN is operating in a phase where growth is increasingly broad-based, with BAF providing earnings stability, insurance businesses transitioning into marginled, value-accretive growth, and new digital platforms moving closer to scale and breakeven.

* Improved execution across life and general insurance, alongside disciplined capital allocation in emerging subsidiaries, is expected to enhance visibility on consolidated value creation over the medium term.

* In BGen, we have largely maintained NEP estimates but increased our PAT estimates by 4%/6% in FY27/FY28, driven by stronger investment performance. In BLife, we have increased our VNB margin estimate by 50bp for FY27. On a consolidated basis, we have increased BJFIN’s EPS estimates by 10%/11% for FY27/28, given BAF’s strong performance.

* Supported by improving trends across its established lending and insurance subsidiaries, along with rising profitability in new businesses, we believe BJFIN is well placed to capitalize on the financial ecosystem opportunity. We recently upgraded BAF to BUY (Link) and are now upgrading BJFIN to BUY with a TP of INR2,490 (based on SoTP).

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