Bajaj Finserv Ltd.
|BSE: 532978||Sector: Financials|
|NSE: BAJAJFINSV||ISIN Code: INE918I01018|
|BSE 15:40 | 24 Jun||12386.50||
|NSE 15:49 | 24 Jun||12333.25||
|Mkt Cap.(Rs cr)||197,119|
|Mkt Cap.(Rs cr)||197118.76|
Bajaj Finserv Ltd. (BAJAJFINSV) - Chairman Speech
Company chairman speech
This letter should have been written to you by Nanoo Pamnani who had taken over as the Chairman of your Company after Rahul Bajaj had stepped down from the post. Tragically that was not be. Nanoo as he was known to all suddenly passed away on 22 February 2020.
For me - and for all of Bajaj Finserv - Nanoo was and will always be a legend. A career banker at Citibank post-retirement Nanoo was kind enough to join as an Independent Director on the Board of your Company as of January 2008.
He was much more than being just an Independent Director. Nanoo mentored me and many senior managers in Bajaj Finserv Bajaj Finance Ltd. (BFL) Bajaj Allianz Life Insurance Company (BALIC) and Bajaj Allianz General Insurance Company (BAGIC) on every critical aspect of business and leadership. And all done with a gentle yet occasionally persistent touch. It was not only that. Nanoo helped change management systems reporting frameworks accountabilities and quietly influenced the strategic directions of each of the companies.
We have all lost a friend and a great mentor. May Nanoo's soul rest in peace.
Now on to business. As you know your Company is the holding company for the various financial services businesses under the Bajaj group.
In lending it is in the financing business through its 53% share in BFL which is listed on The Stock Exchange Mumbai and the National Stock Exchange. BFL has a 100% subsidiary Bajaj Housing Finance Ltd. (BHFL) which is registered with the National Housing Bank as a housing finance company for its mortgage business. BFL also has another 100% subsidiary Bajaj Financial Securities Ltd. (BFinSec) to address the broking business.
Both your Company and BFL are included in the NSE's (National Stock Exchange) Nifty 50 index of top companies in India.
The protection and savings business is done through (i) Bajaj Allianz General Insurance Company Ltd. (BAGIC) for general insurance including health insurance; and (ii) Bajaj Allianz Life Insurance Company Ltd. (BALIC) for life insurance and retirement plans. Both BAGIC and BALIC are unlisted joint ventures with Allianz SE one of the world's leading composite insurers. As on 31 March 2020 Bajaj Finserv held 74% of the equity capital in both BAGIC and BALIC with the balance being held by Allianz.
BFL also participates in the savings business through its fixed deposits vertical.
How has each of the enterprises fared during FY2020?
Let me begin with BFL. Despite losing out on eight days at the end of March on account of the nation-wide COVID-19 lockdown BFL has performed excellently. Here are some key facts:
New loans booked during FY2020 increased by 17% to 27.44 million.
Customer franchise increased by 24% to 42.60 million as of 31 March 2020.
Assets under management (AUM) grew by 27% to Rs 147153 crore as of 31 March 2020.
Net interest income for FY2020 was up by 42% to Rs 16913 crore.
Loan losses and provisions (expected credit loss) for FY2020 were Rs 3929 crore versus Rs 1501 crore in FY2019. BFL took an accelerated charge of Rs 392 crore for two large accounts and made a contingency provision of Rs 900 crore for COVID-19 . Adjusted for these one-time provisions of Rs 1292 crore taken in Q4 FY2020 loan losses and provisions for FY2020 would have been Rs 2637 crore.
Profit after tax (PAT) for FY2020 grew by 32% to Rs 5264 crore even after absorbing the above provisions.
The capital adequacy ratio (including Tier-II capital) as of 31 March 2020 stood at 25.01%. The Tier-I capital stood at 21.27%.
Bajaj Housing Finance (BHFL) a 100% subsidiary of BFL also did well in FY2020. It earned a net interest income of Rs 1030 crore; profit before tax (PBT) of Rs 567 crore; and PAT of Rs 421 crore.
What about the insurance companies? Both BALIC and BAGIC faced the turmoil of COVID-19 at the end of FY2020 - and BAGIC had to deal with the costs of Cyclone Fani that hit Orissa. Yet both posted good results.
In general insurance BAGIC's results for FY2020 are synopsised below:
Some 26.9 million policies were issued in the year versus about 20 million in FY2019.
Gross written premium rose by 15.6% for FY2020 to Rs 12833 crore.
BAGIC's market share in the industry including standalone insurers improved to 7.16% versus 6.86% a year earlier.
Net earned premium grew by 17.1% to Rs 8206 crore.
The combined ratio which is a measure of the profitability of the insurance operations was 100.8% and expected to be among the best in the industry.
PAT increased by 28.1% to Rs 999 crore.
In life insurance BALIC's results for FY2020 were:
Individual rated new business premium increased by 10.6% to Rs 1927 crore which was higher than the industry growth rate of 6.2%
Group protection new business premium increased by 29.1% to Rs 1872 crore.
New business premium grew by 5.2% to Rs 5179 crore.
Renewal premium rose by 16.2% to Rs 4574 crore. Hence gross written premium increased by 10.1% to Rs 9753 crore.
New Business Value (NBV) which is the metric used to measure profitability of life insurance businesses increased by 47.4% to Rs 227 crore.
PAT for FY2020 was Rs 450 crore.
13th month persistency remained steady; and 25th month persistency saw an improvement.
BALIC is soundly capitalised with a solvency ratio of 745% as on 31 March 2020 which is well in excess of the minimum regulatory requirement of 150%.
Thanks to the commendable business and financial performance of BFL BAGIC and BALIC your Company's financials have also done well. Under Ind AS when preparing consolidated financials your Company has had to provide for unrealised mark-to-market losses in respect of equity holdings of the insurance companies of Rs 768 crore in Q4 FY2020.
Bajaj Finserv's consolidated revenue for FY2020 was Rs 54351 crore - representing a 28% increase over the previous year.
Consolidated profit after giving effect to the COVID-19 impact of provision for loan losses and unrealised equity losses was Rs 3369 crore - up by 5% compared to the previous year.
For each of businesses that constitute Bajaj Finserv the real challenge will be in FY2021 as their managements design operationalise and implement ways of dealing with the potentially deleterious consequences of COVID-19 . Focusing on cost efficiencies speedier deliveries and leveraging the IT infrastructure to bring about significant improvements in ways of doing business will be crucial. There are some positive trends also that are likely to emerge as customers embrace digital ways of interacting with our companies.
On my part while I acknowledge the challenges posed by COVID-19 I remain confident of the capability zeal and resolve of the management teams in each of the companies. Therefore despite a seemingly grim scenario I remain cautiously optimistic about your Company and each of its businesses.
With best wishes
Chairman & Managing Director