MFSL Q2 FY26 earnings call.

Guidance to track

• Management maintained FY26 growth guidance despite GST headwinds, citing strong momentum across channels and product segments. H1 performance at 15% growth provides confidence in achieving full-year target.
• Despite ~300-350bps GST impact, management committed to maintaining margin guidance through product mix optimization (protection/annuity shift), distributor renegotiations, and cost controls. Product mix contributes 60-70% of margin improvement.
• Management targets operating return on embedded value in the 18-19% range over the next 2-3 years, acknowledging that as EV base grows, VNB as percentage of opening EV will normalize.
• Management expressed confidence in significantly better H2 growth from AXIS Bank channel (Q2 at 7%) citing product mix correction completion, digital initiatives, and transformation projects in progress.

Risks flagged

• Despite being a flagship partnership, AXIS Bank grew only 7% in H1 vs 14% overall partnership growth. While management expects H2 improvement, the structural reasons for underperformance were not fully addressed. Multiple analysts probed this issue without receiving a satisfactory timeline for acceleration.
• MFSL's GST impact of ₹268 crore on EV (110bps of opening EV) is ~2x peers (40-50bps) because their traditional participating products have higher renewal commissions structurally affected by ITC disallowance. This is a permanent product design disadvantage versus more ULIP-heavy competitors.
• With ULIP already reduced from 60%+ to 50% at AXIS Bank, management explicitly stated no further reduction planned. Since ULIP was a margin dilutive product, this limits future mix-driven margin expansion. Any industry slowdown in equity markets could re-accelerate ULIP mix, pressuring margins.
• Management acknowledged that opex growth (11%) has been in line with sales growth due to ongoing investments in agent expansion (1.42 lakh agents from 61,000 in FY22) and branch additions. The anticipated operating leverage from scale has not materialized yet, meaning margin upside is dependent on revenue growth sustaining.

Key quotes

• We will navigate some of these things to ensure that we hold on to the guidance number and I'll leave it at that rather than kind of give us specific details around percentages here.
• We have looked at segments very closely. We've spoken about NRI as a case in point but I think most importantly what stands out is the continuity factor for us... We've always maintained that we'll be able to deliver better than what the industry is doing by almost around 300 to 500 bips and I feel very confident about this.
• If you really see there are three categories which as a license we are permitted to play in. There is a discipline savings category. There is the mortality mobility category and then there is a longevity category. The later two categories are fairly underpenetrated and India continues to provide significant opportunities in that space.