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As you know, Bajaj Finserv is the financial services arm of the Bajaj group, and is the holding company under which there are three key businesses: (i) lending through Bajaj Finance Ltd. (BFL), earlier Bajaj Auto Finance, which is a listed company; (ii) life insurance, under Bajaj Allianz Life Insurance Company Ltd., or BALIC; and (iii) general insurance, under Bajaj Allianz General Insurance Company Ltd., or BAGIC.
In addition, there is a wholly owned subsidiary called Bajaj Financial Solutions Ltd. (Bajaj Finsol), which offers financial products and advises clients on financial and wealth management; and there are wind–farm assets in Maharashtra with an installed capacity of 65.2 MW.
FY2013 was yet another very difficult year for the economy. In this challenging environment, the Company has performed well. Consolidated gross revenue grew by 9% to Rs. 15,814 crore, consolidated total income grew by 30% to Rs. 5,075 crore and consolidated profit after tax grew by 18% to Rs. 1,574 crore.
Let me briefly share with you the key achievements of your Company in FY2013 under BFL, BALIC and BAGIC.
Lending: Bajaj Finance Ltd. (BFL)
Despite difficulties in the economy, BFL has done exceptionally well and, under adversity, actually bettered its performance vis–a–vis the previous year. Here are some key facts:
1. BFL's total income increased by 43% to Rs. 3,111 crore in FY2013.
2. Profit before tax grew by 45% to Rs. 872 crore.
3. Profit after tax rose by 46% to Rs. 591 crore.
4. Loan deployment was up by 23% to Rs. 19,367 crore.
5. BFL ended the year with net non–performing assets (net NPA) accounting for only 0.19% of its total loan book, which is among the lowest in the industry.
6. Capital adequacy as on 31 March 2013 stood at 21.95%, which was well above the RBI norms.
7. It successfully raised capital to the tune of Rs. 744 crore through an oversubscribed rights issue in February 2013. This additional capital will give BFL extra headroom to generate further growth over the next couple of years.
Life Insurance: BALIC
1. New business premiums for the industry as a whole have been dropping in the last two years by 10% in FY2012 and then again by 6% in FY2013. In such an environment, BALIC has done well. After suffering a drop in new business premium to the tune of 22% in FY2012, it has turned around by registering a growth of 10% in FY2013 to Rs. 2,988 crore.
2. Within the private sector, BALIC's market share of new business was 9.7% in FY2013.
3. BALIC was at fourth position among the private life insurers on new business premiums for FY2013.
4. Renewal premium reduced by 18% to Rs. 3,905 crore in FY2013.
5. BALIC's gross premium written in FY2013 was 8% lower than the previous year, and stood at Rs. 6,893 crore.
6. Shareholders' profit for FY2013 was Rs. 1,286 crore 1.9% lower than the previous year.
7. As on 31 March 2013, total assets under management were Rs. 38,003 crore, compared to Rs. 39,433 crore a year earlier.
8. Including accumulated profits of Rs. 3,636 crore as on 31 March 2013, the shareholders' net worth was Rs. 4,844 crore, versus Rs. 3,561 crore a year ago.
9. BALIC's solvency ratio was 643% as on 31 March 2013 which is significantly higher than the minimum regulatory requirement of 150%.
The major challenges for the life insurance business involve (i) re–designing traditional and linked products in line with the new IRDA regulations, (ii) improving persistency of policies, (iii) increasing productivity of the sales force, improving the quality of agents, and presenting insurance agency as an attractive long–term career, and (iv) rationalising the cost structure while growing the business.
General Insurance: BAGIC
The general insurance industry grew by 19% for FY2013. BAGIC's gross written premiums (GWP) grew by almost 22% to Rs. 4,063 crore in FY2013.
1. BAGIC accounted for a market share 6.4%, excluding specialised insurers.
2. Excluding premiums from the Motor Third Party Pool, net earned premium for FY2013 grew by 23% to Rs. 2,709 crore.
3. Profit before tax for FY2013 was Rs. 421 crore up from Rs. 194 crore in the previous year.
4. Profit after tax was Rs. 295 crore versus Rs. 124 crore in FY2012.
5. The return on average equity for FY2013 was 26.7% which was 12.9 percentage points higher than in the previous year.
6. BAGIC's combined ratio, which signifies the profitability of the general insurance business, remained among the best in the market. This emphasises the Company's strong underwriting and claims management skills.
7. BAGIC's solvency margin was at 179%. This was well above the normal regulatory requirement of 150%.
8. The Company's cash and investments as on 31 March 2013 stood at Rs. 5,845 crore versus Rs. 4,758 crore in the previous year.
There is clear challenge going forward. The slowdown in sales of motor vehicles thanks to tardy GDP growth, if it continues, can have a detrimental effect on the industry and BAGIC.
On balance, FY2013 has been a good year for your Company. I do believe that there could be challenges in FY2014 on account of continuing economic and political uncertainties in what is a general election year. The life insurance business will have to work even harder to generate profits. So, too, general insurance. And BFL will need to be even more adroit at managing its business while charting its growth path.
All this will take great managerial skills, unswerving focus and dedicated teamwork. The good news is that BFL, BALIC and BAGIC have these qualities in abundance. Therefore, I exhort them to rise above the challenges and deliver still better results in FY2014.
Thank you for your support.