Insurance boost to Bajaj Finserv’s earnings
For long Bajaj Finserv’s engine of growth in both revenue and profit had been its insurance business which changed as the finance conglomerate went full throttle on consumer financing from 2011-12 onwards.
Bajaj Finance, its consumer business arm, has increased its contribution to the parent’s profits and now accounts for about 40% of the total profit of the parent.
But Bajaj Finserv’s profits for the September quarter have grown by 30.5% mainly because of the stellar performance of the general insurance business.
Bajaj Allianz General Insurance reported a net profit of Rs173.5 crore, a rise of 30% from a year ago.
The insurer’s gross written premium rose 42% to Rs2,179 crore but its assets under management (AUM) grew by 3% to Rs10,360 crore. Much of the business growth seems to be coming from direct sourcing rather than intermediaries, while the contribution of brokers and individual agents has fallen sharply.
However, the life insurance business continues to flounder. Bajaj Allianz Life Insurance saw its net profit decline sequentially and from the year-ago period. The management has stated that the company’s profits would begin showing higher growth rate over the next two years.
The consumer business through Bajaj Finance continued to show strong AUM growth of more than 30%.
For the September quarter, profit rose 46% and as usual vehicle finance and consumer durables contributed the highest to growth.
The fact that the lender has reduced loan against property augurs well for an asset quality that is already strong. But on a sequential basis, there seems to be a slowdown in many parts for Bajaj Finance.
Given that the insurance business has now fired up, investors would want a clear valuation now more than before.
Talks of Allianz parting ways with the Bajaj group for both the life and general insurance business have been doing the rounds for quite some time.
While the company has been tight-lipped about the same, if a deal goes through, it would give investors a clear valuation benchmark.
Currently, investors arrive at a value for these businesses through various ways or proxies. While Bajaj Finserv’s shares have clocked an impressive 25% rise over the last three months, analysts are already terming Bajaj Finance pricey.