Bajajfinsv vs Divislab Q1 FY24

Bajaj Finserv reported a strong Q1 FY24 with consolidated PAT up 48% YoY to INR 1,943 crore and total income up 47% to INR 23,280 crore. The general insurance arm (BAGIC) posted a combined ratio of 100.7% (vs 104.6% last year) driven by lower loss ratios in motor and commercial lines, while life insurance (BALIC) grew individual WRP by 15% despite a high base. Bajaj Finance continued its momentum with AUM growth of 32% and record low GNPA of 0.87%. Management highlighted strong distribution expansion in BAGIC and product mix normalization in BALIC post-Q1 tactical shifts. Key risks include intensifying competition in crop insurance due to EoM arbitrage and potential flood claims in Q2 from North Indian rains.

Guidance read

BALIC to maintain NBV growth in line with past trends: Management expects absolute NBV to grow at a similar pace as historical 24% rolling 12-month growth, with margins stabilizing around 15%. BAGIC to sustain motor growth for 1-2 years: Expansion in distribution and geographies is expected to sustain motor growth in the medium term, though market dynamics may affect it. BALIC product mix to normalize from Q2: After a tactical Q1 with higher ULIP share, PAR mix is expected to revert to December 2022 levels, with corrective actions already taken in July.

Risk read

Key risks include Intensifying competition in crop insurance — Private players are aggressively bidding for crop insurance to utilize EoM allowances, potentially compressing margins for BAGIC.; North Indian flood claims in Q2 — Heavy rainfall in North India may lead to elevated motor and property claims, though management expects material impact to be assessed only in Q2 call.; Health insurance loss ratio pressure — Retail health loss ratios remain elevated due to fraud and claims inflation; management is investing in analytics but improvement may take time..

Promise ledger

Scorecard data is being built as historical quarters are processed.

Divis Laboratories reported a consolidated total income of INR 1,859 crore for Q1 FY24, down from INR 2,343 crore in the same quarter last year, reflecting the absence of COVID-related demand and ongoing pricing pressures in generics. PAT stood at INR 66 crore, impacted by lower sales and forex gains. Management highlighted easing raw material costs and logistics, with material consumption falling to 39% of sales. The custom synthesis segment (40% of mix) is progressing well with phase II/III projects and two large commercial projects ramping up. Contrast media and Sartans are key growth drivers, with MRI contrast media validation expected by FY24-end. Unit III greenfield project is on track with INR 1,500 crore initial investment, expected to contribute by mid-FY25. Management guided for a steady-state EBITDA margin of 35-40% and double-digit revenue growth over the medium term, excluding one-offs. Key risks include sustained pricing pressure in US/European generics and potential raw material volatility.

Guidance read

Steady-state EBITDA margin of 35-40%: Management expects EBITDA margins to stabilize in the 35-40% range over the long term, excluding COVID-related distortions. Double-digit revenue growth over medium term: Management anticipates double-digit revenue growth going forward, driven by custom synthesis, contrast media, and Sartans. Unit III greenfield project to commercialize by mid-FY25: The Unit III project in Kakinada, with an initial investment of INR 1,500 crore, is expected to start commercial production by mid-2025. MRI contrast media validation by end of FY24: Validation for some MRI contrast media products is expected to be completed by the end of the current financial year, enabling customer sampling.

Risk read

Key risks include Sustained pricing pressure in US/European generics — Management acknowledged potential impact of price pressures in US and European markets on operating margins, though they remain optimistic.; Raw material price volatility — While raw material prices are currently softening, management noted that price variations could recur, especially for solvents like acetonitrile.; Dependence on custom synthesis project ramp-up — Custom synthesis growth depends on customer approvals and project timelines, which are uncertain and not quarter-to-quarter predictable..

Promise ledger

Scorecard data is being built as historical quarters are processed.