Result Update

February 5, 2016
Rating matrix
Rating
Target
Target Period
Potential Upside

Bajaj Finserv (BAFINS)

Buy
| 2308
12 months
21%

Finance business steals the show..

Whats Changed?
Unchanged
Changed from | 129.2 to | 118.8
Changed from | 160.3 to | 148.0
Unchanged

Target
EPS FY16E
EPS FY17E
Rating

Quarterly Performance
| Crore
Income from oper.
Total expenditure
PBT
Tax + Minority
PAT

Q3FY16 Q3FY15 YoY (%) Q2FY16 QoQ(%)

2444
1904
28.3
2224
9.9
1490
1156
28.8
1326
12.3
954
748
27.6
898
6.3
517
401
29.0
457
13.2
437
347
25.9
441
-0.9

Key Financials
| Crore
Revenue
PBT
Net Profit
EPS (|)

FY14
15,537.7
2,905.0
1,547.7
97.3

FY15
18,051.1
3,246.2
1,689.8
106.2

FY16E
20,645.8
3,796.3
1,890.9
118.8

FY17E
23,466.3
4,587.3
2,354.8
148.0

Valuation summary
P/E
Target P/E
P/ABV
Target P/ABV
RoE
RoA

FY14
19.6
23.7
3.3
3.9
18.1
2.2

FY15E
18.0
21.7
2.8
3.3
16.7
2.0

FY16E
16.1
19.4
2.4
2.9
15.9
1.9

FY17E
12.9
15.6
2.0
2.4
16.8
2.0

Stock data
Particular
Market Capitalization
Net worth
52 week H/L (|)
Equity capital
Face value
DII Holding (%)
FII Holding (%)

Amount
| 30290 crore
|12472 crore
2160/1250
| 80 Crore
|5
7.9
7.8

Price performance (%)

Bajaj Finserv Ltd
HDFC Ltd
Reliance Capital Ltd

1M
(4.0)
(4.0)
(26.7)

3M
(3.8)
(4.2)
(20.3)

6M
(7.2)
(10.3)
(15.8)

| 1909

12M
27.8
(5.2)
(31.8)

Research Analyst
Kajal Gandhi
kajal.gandhi@icicisecurities.com
Vishal Narnolia
vishal.narnolia@icicisecurities.com
Vasant Lohiya
vasant.lohiya@icicisecurities.com

ICICI Securities Ltd | Retail Equity Research

Consolidated net profit came in at | 437 crore in Q3FY16, lower than

our estimate of | 495 crore, impacted by under-writing losses at | 116
crore in the general insurance business related to Chennai floods
General insurance premium growth came in steady at | 1348 crore,
up 14% YoY. However, PBT declined 53.7% YoY to | 95 crore owing
to under-writing losses related to claims arising out of Chennai floods
The life insurance business remained weak at | 1225 crore (down
15% YoY), in line with our estimate, as new business and renewal
premium remained subdued
Providing a boost to consolidated performance, commercial finance
business continued to see traction with 39% YoY topline growth at |
2069.7 crore (I-direct estimate - | 1885.4 crore). PBT also increased
59.4% YoY at | 632.9 crore; higher than our estimate of | 522.8
Strong brand name enhances sustainability, reliability
Bajaj Finserv, a financial conglomerate under flagship brand of Bajaj and
leadership of Sanjeev Bajaj, has witnessed a sharp surge in earnings in all
three key business segments. In general insurance, it is the most profitable
and efficient player among competitors. Bajaj Finance, a niche consumer
durable lender, reported a 4x increase in the loan book in FY11-15 while
earnings surged at 38% CAGR. BALIC enjoys a market share of ~6.8%.
Post revision, expect consolidated revenue, PAT to grow at a CAGR of
14%, 18% to | 23466 crore, | 2355 crore, respectively, in FY15-17E.
Niche in general insurance; superior return ratios compared to peers
Strong business model generating RoE in excess of 24%, reporting
underwriting profit on <100% combined ratio and extensive retail focus
enable market share of ~6% in gross written premium (GWP). Prudent
underwriting with 70% of net earned premium (NEP at | 3832 crore in
FY15) in the retail segment (motor, health insurance) remains a key
rationale for sustained profit, net worth growth. Higher claims led to underwriting losses in Q3FY16. We expect NEP, PAT to continue steady growth
at 14.2%, 8.8% CAGR to | 4997 crore, | 665 crore, respectively.
Bajaj Finance profit surges, gaining mindful share in consolidated P/L
A distinguished business model in consumer durables portfolio boosted
loan book, growing 35% YoY to | 32410 crore in FY15 while asset quality
sustained despite a weak economic environment. Margins sustained
~10% due to higher IRR in products. PAT surged at 38% CAGR to | 897
crore in FY11-15 with contribution bulging to 42% from 25% earlier.
Expect healthy PAT growth of 33% CAGR in FY15-17E to | 1597 crore.
Life insurance huge potential, need right strategy to explode
Bajaj Allianz Life Insurance posted its first profit since FY10 of | 542 crore &
is now earning higher PAT of | 876 crore (FY15). Post regulatory overhang
on Ulip, etc, fading now, business is gradually picking up. FY17E NBP, PAT
may grow 12.1%, 6.4% CAGR to | 3088 crore, | 932 crore, respectively.
Expected to exhibit growth coupled with stability; maintain BUY
Based on SOTP valuation, we maintain our target price of | 2308/share for
Bajaj Finserv, which implies a multiple of 15.6x on FY17E consolidated
earnings. The stock is available at reasonable P/E valuation of 12.9x FY17E
earnings even post conservative forward estimates on life and general
insurance. Dividend from the insurance business can be an upside risk. We
maintain BUY recommendation on the stock.

Variance analysis
Q3FY16
1348.4

Q3FY16E
1,301.4

Q3FY15
1,183.1

YoY (%)
14.0

Q2FY16
1,500.2

QoQ (%)
-10.1

Life Insurance
Net premium earned
Investment and other income
Reinsurance Ceded
Reserve for unexpired risk
Total Insurance

1225.2
1225.2
708.3
244.5
82.2
2955.2

1,226
1,225.6
776
286
35
2,981.5

1,441.9
1,441.9
645
256
-13
3,027.2

-15.0
-15.0
9.8
-4.5
-713.9
-2.4

1,172
1,171.9
750
382
74
2,966.4

4.6
4.6
-5.5
-35.9
11.3
-0.4

Retail financing
Windmill
Investment and others
Total
Interest and Finance Charges
Other Exp
Total Expenses
PBT

2069.7
10.4
53.8
5069.2
733.8
3381.3
4115.0
954.2

2,070
10.0
59
5,107
664.6
3,473.4
4,138.0
969.3

1,486
9.9
49
4,560
587.5
3,224.1
3,811.6
748.0

39.3
5.0
9.3
11.2
24.9
4.9
8.0
27.6

1,701
23.1
103
4,730
689.0
3,143.0
3,832.1
897.8

21.7
-55.2
-47.7
7.2
6.5
7.6
7.4
6.3

PAT
437.3
Source: Company, ICICIdirect.com Research

494.9

347.4

25.9

441.1

-0.9

General Insurance

Comments
General insurance premium remained on steady growth path
De-growth in renewal and new business premium impacted premium
growth; as expected during the quarter

Topline traction continued due to healthy growth in AUM at 41% YoY

PAT growth impacted due to weak profitability in general insurance due

to Chennai floods

Change in estimates
(| Crore)
Old
Total Income
20,325.1
PBT
3,915.3
PAT
2,055.5
ABV (|)
817.0
Source: Company, ICICIdirect.com Research

FY16E
New
20,588.9
3,899.2
2,024.3
815.1

% Change
1.3
-0.4
-1.5
-0.2

Old
22,995.5
4,663.3
2,550.8
975.6

FY17E
New
23,367.3
5,111.3
2,826.4
991.0

% Change
1.6
9.6
10.8
1.6

Earlier
FY16E
31.5
3.3
13.0

FY17E
27.0
5.8
14.5

Assumptions
FY14
Commercial Finance growth (%)
37.2
Life Ins Premium growth (%)
-15.2
General Ins GWP growth (%)
11.5
Source: Company, ICICIdirect.com Research

FY15
35.8
3.0
15.6

ICICI Securities Ltd | Retail Equity Research

Current
FY16E
FY17E
40.0
29.0
-0.8
5.3
12.5
14.0

Page 2

Company Analysis
Business interests
Bajaj Finserv is a financial conglomerate engaged in life insurance, general
insurance, consumer finance and other financial products. Apart from
financial services, the company has an operational wind energy asset. The
portfolio of the company includes 74% in the two insurance companies
viz. Bajaj Allianz Life Insurance Company (BALIC) and Bajaj Allianz General
Insurance Company (BAGIC), 50% holding in Bajaj Allianz Financial
Distributors, 57.6% in Bajaj Finance and 100% holding in Bajaj Financial
Solutions.
Consolidated revenues grew at 5% CAGR in FY10-15 from | 13997 crore to
| 18030 crore. Within the same, the contribution of insurance was 54%
while that of Bajaj Finance was 30% in FY15. Improving profitability from
the life insurance segment, compared to loss in FY08 of | 213 crore to PBT
of | 1349 crore in FY12, led PBT to grow at 31.3% CAGR in FY10-15 to
| 3246 crore. With new IRDA guidelines, from FY13, the life insurance
segment deteriorated while the Bajaj Finance business, which picked up
from FY11 (10x rise in PBT from | 38 crore to | 310 crore) started
contributing higher proportion to PBT. General insurance also normalised
from FY13. Going ahead, we estimate consolidated revenues will grow at
14% CAGR in FY15-17E to | 23466 crore. The bottomline is seen growing
at ~18% CAGR in FY15-17E to | 2355 crore.
Strong traction in commercial finance boosted the topline. Continued weak
performance in life and general insurance business and incremental claims
in general insurance owing to Chennai floods impacted profitability, which
was at the lowest level of the current fiscal at | 437 crore in Q3FY16.
Exhibit 1: Consolidated profit summary
Particulars
General Insurance
Life Insurance
Total Insurance
Investments & others
Windmill
Retail financing
Less: Inter-segment revenue
Total revenue
Interest and Finance Charges
Other Exp
Total Expenses
PBT
PAT

Q3FY14
1074
1385
2787
35
10
1082
6
3909
406
2919
3325
584
284

Q4FY14
1268
2140
3577
42
1
1095
7
4708
445
3057
3502
1206
708

Q1FY15
1177
795
2295
42
14
1246
7
3590
495
2437
2931
658
319

Q2FY15
1475
1401
2929
87
20
1242
51
4227
544
3043
3588
639
316

Q3FY15
1183
1442
3027
49
10
1486
12
4560
588
3224
3812
748
347

Q4FY15
1465
2379
4134
100
7
1445
11
5675
603
3872
4474
1201
707

Q1FY16
1322
1082
2773
59
14
1656
15
4487
665
2897
3562
925
467

Q2FY16
1500
1172
2966
103
23
1701
63
4730
689
3143
3832
898
441

Q3FY16
1348
1225
2955
54
10
2070
20
5069
734
3381
4115
954
437

Source: Company, ICICIdirect.com Research

Bajaj Finance is the highest profit making segment

with PAT growing at 59% CAGR in FY10-15 to | 898
crore in FY15

Strong traction in finance book to continue in FY15-17E

Bajaj Finance is the highest profit making segment with PAT growing at
59% CAGR in FY10-15 to | 898 crore in FY15. NII CAGR has been 36% in
FY10-15 while in the past three years it has been maintained above 30% at
32% to | 2872 crore as on FY15. The margins, on an average, have been
above 10% over the past three to five years. Strong traction on the
advances front of 51% CAGR in the past five years and 36% CAGR in the
past three years has helped maintain NII traction.
Strong growth in PAT was seen at 58% YoY to | 408 crore led by strong
NII growth at 48% YoY to | 1222 crore. AUM grew 41% YoY at | 43452
crore largely led by the consumer finance segment, which increased 43%

ICICI Securities Ltd | Retail Equity Research

Page 3

YoY to | 18382 crore, followed by SME & commercial segments, which

were up 32% YoY & 51% YoY, respectively.
Based on higher AUM growth in Q3FY16 at | 43452 crore compared to our
estimate of | 41366 crore, we have revised our estimates upwards and
now expect AUM growth at 34% CAGR to | 58533 crore in FY15-17E, led
by CF segment (45% CAGR) that will be driven by CD financing business.
Enhanced competition and growing risks in the LAP segment may keep
traction in the SME segment lower at 42% CAGR. Consequently, NII
estimates have also been revised upwards to grow at 34% CAGR to | 5176
crore (previous estimate of 29% CAGR to | 4811 crore) in FY15-17E. On
the back of strong traction in NII growth, steady cost to income ratio and
declining credit costs, we expect BFL to clock strong PAT CAGR of 33% in
FY15-17E to | 1597 crore.
Exhibit 2: Consumer finance & SME to remain major contributor
120.0
100.0

0.5
10.8

0.8
10.2

1.0
10.3

1.5
9.7

1.7
10.0

2.7
11.0

49.2

47.2

48.0

46.8

46.9

44.1

39.5

41.8

40.7

42.0

41.3

42.3

Q2FY15

Q3FY15

Q4FY15

Q1FY16

Q2FY16

Q3FY16

(%)

80.0
60.0
40.0
20.0
0.0

Consumer Finance

SME Business

Commercial

Rural

Source: Company, ICICIdirect.com Research

Exhibit 3: Strong AUM traction boost performance in Q3FY16

| crore
NII
Total income
Total expenses
Provision
PBT
Loan outstanding

Q3FY14
618
547
298
79
295
22461

Q4FY14
553
584
306
62
277
24061

Q1FY15
680
558
343
83
321
26943

Q2FY15
626
564
319
80
299
28004

Q3FY15
824
561
392
108
393
30822

Q4FY15
741
584
375
114
345
32410

Q1FY16
895
576
453
103
422
35557

Q2FY16
897
601
441
137
428
37964

Q3FY16
1222
590
549
147
625
43452

Source: Company, ICICIdirect.com Research

Life insurance business to stabilize in two or three years

Group premium has been driving the business for BALIC

currently at 66% of NBP in Q3FY16

ICICI Securities Ltd | Retail Equity Research

Bajaj Allianz Life Insurance (BALIC), a 74:26 JV between Bajaj Finserv and
Allianz SE recorded its first profit since FY10 of | 542 crore. The company
is now earning higher PAT of | 876 crore, after touching peaks of | 1311
crore. First year new business premium (NBP) growth has been under
pressure from FY09 onwards due to a slowing economy while declining
traction in Ulip from FY10 further impacted total premiums, to reach | 5844
crore in FY14 from over | 10600 crore in FY09. Going ahead, we expect
the life insurance business to remain on a slower track with share of
individual business improving gradually post FY17E. Hence, we expect the
premium to grow at 2.2% CAGR to | 6283 crore in FY15-17E.

Page 4

The life insurance business Q3FY16 GWP declined 15% YoY to | 1225
crore as new business premium dipped 6% YoY to | 538 crore and
renewal de-grew 21% YoY to | 687 crore. PAT was at | 191 crore; up 9%
YoY.
We factor in an improvement in the scenario with linked NBP from
individual growing at 12.1% CAGR to | 3088 crore and APE seen growing
at 17.0% CAGR (on lower base) to | 1897 crore over FY15-17E.
Gross written premium (GWP) has de-grown at 20% CAGR from FY12-15
to | 6017 crore, on account of a decline in linked premium led by
surrenders. BALICs linked premium share in total premium declined from
highs of 94% in FY09 (| 9986 crore) to 29% (| 1746 crore) in FY15. On an
NBP basis, it has declined from 99% to 19% in FY15. Regulatory changes
in September 2010 along with a market correction led to an increase in
surrenders from | 4464 crore in FY11 to | 7250 crore in FY14. Accordingly,
AUM declined from | 32880 crore in FY11 to | 21287 crore in FY14. Going
ahead, an anticipated increase in AUM will assist interest income while
lower surrenders will boost persistency ratios. Therefore, after witnessing
a decline in PAT from FY13 to FY15 due to declining AUM, we expect PAT
to remain in positive territory ahead. However, based on subdued growth
in new business and renewal premium in 9MFY16 and anticipation of
slower traction in near term, we have revised our PAT growth estimate
downward at 6.4% CAGR in FY15-17E to | 932 crore (from our previous
estimate of |1110 crore) with AUM growth at 11.5% CAGR over FY15-17E.
Exhibit 4: Life insurance premium (NBP)
13

11.8

11.3

11

(| Billion)

9
7

8.2
6.5

6.7

6.6

6.8

6.1

4.4

6.7
5.7
4.6

3.9

5.4

Q3FY16

Q2FY16

Q1FY16

Q4FY15

Q3FY15

Q2FY15

Q1FY15

Q4FY14

Q3FY14

Q2FY14

Q1FY14

Q4FY13

Q3FY13

Q2FY13

Source: Company Quarterly Presentation, ICICIdirect.com Research

With an APE decline, new business achieved profit (NBAP) margins

moderated from 14.3% to 11% in FY13 but surged again to 18% in FY15
on a lower APE base (APE excludes group superannuation business). We
believe these NBAP margins are unsustainable in the near term and expect
it to stabilise around 13-14% over the next two years.

ICICI Securities Ltd | Retail Equity Research

Page 5

Exhibit 5: Life business growth on slower track

Total premium
New business premium
Renewal premium
Policyholder profits
Shareholder profits*
Total profits
Solvency ratio (%)

Q3FY14
1385
678
707
183
115
298
733

Q4FY14
2140
817
1323
49
639
688
734

Q1FY15
796
394
402
115
0
115
785

Q2FY15
1401
610
791
140
103
243
802

Q3FY15
1442
572
870
76
99
175
782

Q4FY15
2379
1127
1252
71
488
559
761

Q1FY16
1082
674
408
142
99
241
788

Q2FY16
1172
460
712
151
65
216
809

Q3FY16
1225
538
687
49
142
191
797

Source: Company, ICICIdirect.com Research

General insurance growth to remain steady

Exhibit 6: General insurance business mix, share of retail segment remains at ~77%
Retail consists of ~77% of overall business while majority
comprises the motor business, which remains the core
strength of BAGIC

Property and Eng,

11%

Others,
12%

Health, 13%

Motor, 64%

Source: Company Quarterly Presentation, ICICIdirect.com Research

BAGIC has consistently grown over the last decade with gross direct
premium (GWP) growing at 18.2% CAGR in FY05-14, surpassing industry
growth of 15.1% during the same period. In FY15, BAGIC had GWP of
| 5230 crore, growing at 14% YoY compared to 10.1% for industry and
9.7% for private players. The primary focus of the company is on the retail
segment with motor and health insurance forming a major pie contributing
~77% of overall business. Motor continues to form 65% of business mix.
With prudent underwriting practices and focus on preserving profitability,
BAGIC was able to report steady improvement in combined ratio from
111% in FY11 to 98% in FY15, which led to underwriting profits of | 83
crore in FY15. Also, provision due to third party motor pool claims and
exceptional provisioning for Motor Decline Risk pool has been fully taken
in FY14. This had impacted FY12 and FY13 profitability leading to losses
(| 240 crore of transitional liability).
GWP growth remained steady in Q3FY16 at 14% YoY to | 1348 crore.
However, profitability was impacted in Q3FY16 due to under-writing losses
of | 116 crore, related to claims due to Chennai floods that led to a spike in
claims ratio at 77.3% from 70.0% in Q3FY15. Consequently, PBT came in
at | 95 crore vs. | 205 crore YoY. Going ahead, we expect NEP and PAT to
grow at 14.2% and 8.8% CAGR to | 4997 crore and | 665 crore,
respectively.

ICICI Securities Ltd | Retail Equity Research

Page 6

Exhibit 7: Underwriting loss related to Chennai floods hits profitability

Gross Premium
Net Earned Premium
Underwritting profit
Investment income
PBT
PAT
Claim Ratio (%)
Combined Ratio (%)

Q3FY14
1074
899
-13
149
136
95
72
101

Q4FY14
1268
897
-13
157
144
101
76
99

Q1FY15
1177
921
24
158
182
130
72
97

Q2FY15
1475
953
23
170
193
145
75
96

Q3FY15
1183
958
16
189
205
143
70
99

Q4FY15
1465
1000
20
177
197
144
71
95

| crore
Q1FY16
1322
999
28
186
214
147
68
96

Q2FY16
1500
1061
-8
213
205
141
73
99

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 7

Q3FY16
1348
1037
-116
211
95
68
77
109

Outlook and valuation

Given Bajajs strong leadership in the domestic market and presence in
growing business verticals, we expect the entity to continue its focus on
improvement in earnings growth and sustenance of a healthy balance
sheet. Both insurance companies are yet to pay dividend. In case of
payouts, consolidated profits can see further upside not factored in
estimates. The same can improve return ratios further for the consolidated
entity. Going ahead, we expect consolidated revenue and PAT to grow at a
CAGR of 14% and ~18% to | 23466 crore and | 2355 crore, respectively,
over FY15-17E.
Based on SOTP valuation, we maintain our target price of | 2308 per share
for Bajaj Finserv, which implies a multiple of 15.6x on FY17E consolidated
earnings. The stock is available at reasonable P/E valuation of 12.9x FY17E
earnings even post conservative forward estimates on life and general
insurance. Dividend from the insurance business can be an upside risk. We
maintain BUY rating on the stock.
Exhibit 8: Valuation on SOTP basis

Business
Bajaj Allianz Life Insurance
Bajaj Allianz General Insurance
Bajaj Finance
Windmill
Total

Basis
1.4x EV + 10x NBAP
17x PAT
3.7x BV
|6 per mw

Stake (%)
74
74
57.8
100

Value of
Value/
Business stake (|
share after 10%
Value
crore)
discount (|)
18356
13563
767
11496
8507
481
31672
18306
1035
390
390
25
2308

Source: ICICIdirect.com Research

Exhibit 9: Valuation summary

(Year-end March)
Net Profit (| crore)
EPS (|)
Growth (%)
P/E (x)
Price /Book (x)
RoA (%)
RoE (%)

FY12
1,338.0
92.5
10.1
20.6
5.4
2.4
30.3

FY13
1,572.4
98.8
6.9
19.3
3.9
2.5
24.4

FY14
1,547.7
97.3
(1.6)
19.6
3.3
2.2
18.1

FY15
1,689.8
106.2
9.2
18.0
2.8
2.0
16.7

FY16E
1,890.9
118.8
11.9
16.1
2.4
1.9
15.9

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 8

FY17E
2,354.8
148.0
24.5
12.9
2.0
2.0
16.8

Company snapshot
2,500
Target price: | 2308

2,000

1,500

1,000

500

Nov-15

Jun-15

Jan-15

Aug-14

Mar-14

Oct-13

May-13

Dec-12

Jul-12

Feb-12

Sep-11

Apr-11

Nov-10

Jun-10

Jan-10

Aug-09

Mar-09

Oct-08

Source: Bloomberg, Company, ICICIdirect.com Research

Key events
Date
FY07
FY07
FY08

Event
De-merger of erstwhile Bajaj Auto in 2007 and formation of Bajaj Finserv, the financial services arm of Bajaj Group
Induction of new management personnel from leading multinational companies
Diversification of lending portfolio begins vs. earlier legacy business of two & three wheeler financing and consumer durable financing

FY08

Launch of personal loan cross sell business and life insurance distribution business

FY10
FY11
FY14
FY15

Bajaj Allianz Life Insurance records its first profit of | 542 crore in FY10
General insurance business perofmance impacted by high motor claims. Construction equipment financing business launched
Introduction of new regulation by IRDA impacts life insurance profitability
General insurance business reports underwriting profit of | 83 crore

Source: Company, ICICIdirect.com Research

Top 10 Shareholders
R a nk
1
2
3
4
5
6
7
8
9
10

Name
B a ja j G roup of Industries
F irodia G roup of Industries
L ife Insura nce C orpora tion of India
IC IC I P rudentia l Asset Mana ge m e nt C o. L td.
S ikkim Janse va P ratistha n P vt. L td.
Ashoka P te. L td.
B a ja j (R a hulkum ar)
B a ja j (Nira j)
T he V a nguard G roup, Inc.
B a ja j (Ma dhur)

Shareholding Pattern
a te st F iling D ate
30-S e p-15
30-S e p-15
30-S e p-15
30-Jun-15
30-S e p-15
30-S e p-15
30-S e p-15
30-S e p-15
31-D ec-15
30-S e p-15

% O /SP osition (m ) ha nge (m )

54.44
86.6
0.0
4.02
6.4
0.0
2.36
3.7
-0.2
1.28
2.0
-3.1
1.26
2.0
0.0
1.16
1.8
-0.1
1.04
1.7
0.0
0.87
1.4
0.0
0.69
1.1
0.0
0.59
0.9
0.0

(in %)
Promoter
FII
DII
Others

Sep-14 Dec-14 Mar-15 Jun-15 Sep-15

58.9
59.0
58.4
58.4
58.4
9.0
8.2
8.3
7.2
7.8
6.7
7.5
7.4
8.4
7.8
25.4
18.7
26.0
26.1
26.1

Source: Reuters, ICICIdirect.com Research

Recent Activity
B uys
Inve stor na m e
D S P B la ckR ock Inve stm e nt Ma na ge rs P vt. L td.
Allia nce B e rnste in L .P .
B irla S un L ife Asse t Ma na ge m e nt C om pa ny L td.
S im plicity AB
D im e nsiona l F und Advisors, L .P .

V a lue
2.02m
1.28m
0.60m
0.28m
0.16m

S ha re s
0.07m
0.04m
0.02m
0.01m
0.01m

S e lls
Inve stor na m e
IC IC I P rude ntia l Asse t Ma na ge m e nt C o. L td.
L ife Insura nce C orpora tion of India
B a ja j (S he kha r P )
Ashoka P te . L td.
Me llon C a pita l Ma na ge m e nt C orpora tion

V a lue
-73.65m
-5.90m
-3.92m
-2.60m
-0.34m

S ha re s
-3.06m
-0.22m
-0.15m
-0.10m
-0.01m

Source: Reuters, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 9

Financial summary
Profit and loss statement
(Year-end March)
Revenue
Life Insurance
General Insurance
Total
Less: Reinsurance ceded
Reserve for unexpired risk
Net Insurance Premium Earned
Investment and other income
Total Insurance Income
Investment and others
Retail financing
Windmill
Total
Less: Inter-segment revenue
Total revenue
Pre-tax profit
General Insurance
Life Insurance
Total Insurance
Retail financing
Investments & others
Windmill
Total PBIT
Less: Interest
Profit before tax
Tax
Net profit before minority
Minority and deferred tax adjustments
Net profit

| Crore
FY14

FY15

FY16E

FY17E

5843
6017
4584
5301
10427 11318
890
1361
268
177
9269.1 9779.8
2028.0 2605.5
11297.1 12385.2
188.6
278.7
4073.3 5418.3
44.2
50.3
15603.3 18132.5
65.5
81.5
15538 18051

5966
5963
11929
1419
298
10212
2855
13067
295
7308
57
20728
82
20646

6283
6798
13081
1689
238
11153.6
2409.4
13563.1
310.2
9610.8
65.4
23549.4
83.1
23466

589
1162
1751
1087
30
37
1087
30
2905
-710
2195
647
1548

777
1007
1784
1368
63
32
1368
63
3246
-837
2409
719
1690

722
1027
1749
1932
83
32
1932
83
3796
-1015
2781
890
1891

950
1071
2022
2420
109
37
2420
109
4587
-1247
3340
985
2355

FY14
1909.0
159.1
97.3
585.2
2.2
18.1
3.3
19.6

FY15
1909.0
159.1
106.2
689.6
2.0
16.7
2.8
18.0

FY16E
1909.0
159.1
118.8
806.7
1.9
15.9
2.4
16.1

FY17E
1909.0
159.1
148.0
952.9
2.0
16.8
2.0
12.9

FY14

FY15

FY16E

FY17E

-15.2
11.5
37
19
7
-2

3.0
15.6
36
18
16
9

-0.8
12.5
40
17
14
12

5.3
14.0
29
18
14
25

Balance sheet

| Crore

(Year-end March)
Sources of Funds
Shareholders' Funds
- Share capital
- Reserves & Surplus
Policy liabilities
Provision for linked liabilities
Funds for future appropriation in policyholders' account
Minority interest
Loan funds
Defered tax liability (net)
Current liabilities
Provisions
Total liabilities

FY14

FY15

FY16E

FY17E

931
80
9232
11708
21288
184
3542
15773
10
12397
180
74393

1097
80
10894
14606
21645
124
4261
26691
11
13017
187
91515

1284
80
12757
17026
21488
341
5151
36539
11
13603
195
107190

1516
80
15084
19175
20302
358
6136
47074
11
14215
203
122636

Applications of Funds
Fixed assets
Goodwill on investments in associates
Investments
Policyholders' Investments
Assets held to cover linked liabilities
Deferred Tax Assets (net)
Current assets
- Receivable under financing activity
Misc Expenditure
Total Assets

835
429
11457
11536
21288
171
5707
22971
1034
74393

1404
429
14526
14438
21645
188
7686
31199
0
91515

1443
429
16653
16685
21488
198
6615
43679
0
107190

1509
429
18851
18791
20302
207
6202
56346
0
122636

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Key Ratio
(Year-end March)
CMP
No. of shares in mn
EPS
BV
RoA
RoE
P/BV
P/E
(Year-end March) - Growth ratios
Gross Written Premium
- Life
- General
Loan book Bajaj Finance
Consol Networth
Consol Revenues
Consol PAT

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 10

ICICIdirect.com coverage universe (NBFC)

Sector / Company
IDFC (IDFC)
LIC Housing Finance (LICHF)
Reliance Capital (RELCAP)
HDFC (HDFC)
PTC India Financial Services
(PTCIND)
CARE (CARE)
Bajaj Finserv (BAFINS)
Bajaj Finance (BAJAF)

CMP
(|)
41
444
346
1,183

P/E (x)
P/ABV (x)
RoA (%)
RoE (%)
M Cap EPS (|)
TP(|) Rating (| Cr) FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E FY15E FY16E FY17E
60 Buy
6,632 10.7
9.3 13.3
3.9
4.5
3.1
0.4
0.4
0.3
2.1
1.7
2.3 10.5
8.2 10.9
500 Hold 22,401 27.5 33.3 40.3 16.2 13.3 11.0
3.0
2.3
1.9
1.3
1.4
1.4 18.1 18.7 18.2
481 Buy
8,406 39.6 33.6 38.0
8.6 10.2
9.0
0.8
0.7
0.7
2.0
1.5
1.6
7.8
6.3
6.8
1,330 Buy 186,610 38.0 41.8 48.3 31.1 28.3 24.5
6.1
5.6
5.0
2.5
2.4
2.5 20.3 20.3 21.3

34

51

Buy

1,099
1,909
6,642

1,700
2,308
7,125

Buy
Buy
Buy

1,918

5.3

11.8

5.1

6.3

1.4

1.3

1.0

2.6

4.8

3.4

11.5

23.7

16.9

3,186 48.4 45.9 56.9

30,399 106.2 118.8 148.0
35,620 179.9 245.9 299.8

2.9

6.6

22.7
18.0
36.9

24.0
16.1
27.0

19.3
12.9
22.2

8.8
2.8
6.9

8.1
2.4
4.7

7.6
2.0
4.0

43.2
2.0
3.1

44.9
1.9
3.2

50.4
2.0
3.1

38.9
16.7
20.4

33.9
15.9
20.9

39.5
16.8
19.8

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 11

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

ICICI Securities Ltd | Retail Equity Research

Page 12

ANALYST CERTIFICATION
We /I, Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research
report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s)
or view(s) in this report.

Terms & conditions and other disclosures:

ICICI Securities Limited (ICICI Securities) is a Sebi registered Research Analyst having registration no. INH000000990. ICICI Securities Limited (ICICI Securities) is a full-service, integrated investment banking
and is, inter alia, engaged in the business of stock brokering and distribution of financial products. ICICI Securities is a wholly-owned subsidiary of ICICI Bank which is Indias largest private sector bank and
has its various subsidiaries engaged in businesses of housing finance, asset management, life insurance, general insurance, venture capital fund management, etc. (associates), the details in respect of
which are available on www.icicibank.com.
ICICI Securities is one of the leading merchant bankers/ underwriters of securities and participate in virtually all securities trading markets in India. We and our associates might have investment banking
and other business relationship with a significant percentage of companies covered by our Investment Research Department. ICICI Securities generally prohibits its analysts, persons reporting to analysts
and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.
The information and opinions in this report have been prepared by ICICI Securities and are subject to change without any notice. The report and information contained herein is strictly confidential and
meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without
prior written consent of ICICI Securities. While we would endeavour to update the information herein on a reasonable basis, ICICI Securitiesis is under no obligation to update or keep the information
current. Also, there may be regulatory, compliance or other reasons that may prevent ICICI Securities from doing so. Non-rated securities indicate that rating on a particular security has been suspended
temporarily and such suspension is in compliance with applicable regulations and/or ICICI Securities policies, in circumstances where ICICI Securities might be acting in an advisory capacity to this
company, or in certain other circumstances.
This report is based on information obtained from public sources and sources believed to be reliable, but no independent verification has been made nor is its accuracy or completeness guaranteed. This
report and information herein is solely for informational purpose and shall not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. ICICI Securities will not treat recipients as customers by virtue of their
receiving this report. Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific
circumstances. The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. The recipient should independently evaluate
the investment risks. The value and return on investment may vary because of changes in interest rates, foreign exchange rates or any other reason. ICICI Securities accepts no liabilities whatsoever for any
loss or damage of any kind arising out of the use of this report. Past performance is not necessarily a guide to future performance. Investors are advised to see Risk Disclosure Document to understand the
risks associated before investing in the securities markets. Actual results may differ materially from those set forth in projections. Forward-looking statements are not predictions and may be subject to
change without notice.
ICICI Securities or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment
in the past twelve months.
ICICI Securities or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from the date of this report for services in
respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction.
ICICI Securities or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the companies mentioned
in the report in the past twelve months.
ICICI Securities encourages independence in research report preparation and strives to minimize conflict in preparation of research report. ICICI Securities or its analysts did not receive any compensation
or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither ICICI Securities nor Research Analysts have any
material conflict of interest at the time of publication of this report.
It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts of this report have not received any compensation from the companies mentioned in the report in the
preceding twelve months.
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
ICICI Securities or its subsidiaries collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the
publication of the research report.
Since associates of ICICI Securities are engaged in various financial service businesses, they might have financial interests or beneficial ownership in various companies including the subject
company/companies mentioned in this report.
It is confirmed that Kajal Gandhi, CA, Vasant Lohiya, CA and Vishal Narnolia, MBA, Research Analysts do not serve as an officer, director or employee of the companies mentioned in the report.
ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.
Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.
We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.
This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution,
publication, availability or use would be contrary to law, regulation or which would subject ICICI Securities and affiliates to any registration or licensing requirement within such jurisdiction. The securities
described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and
to observe such restriction.

ICICI Securities Ltd | Retail Equity Research

Page 13