Co looks to grow at a rate of 20-25% every year: Bajaj Finserv

Regarding a break-up with Allianz, Bajaj said talks are underway.Below is the verbatim transcript of Sanjiv Bajaj's interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Latha: Why is it that Bajaj Finserv profits are lower this year compared to last year?A: It is something that we have been talking about for the last few quarters. So when you look at Q4 till last year, the entire profit of the year in the case of our life insurance company from the policyholder funds, nearly Rs 400-450 crore used to transfer to the shareholder of funds only at the end of the year.At the end of Q4 after doing audited results, we realised that most of our peers were doing this quarterly and there was a provision allowed to do it quarterly if you move to quarterly audits. So from this financial year, we have moved to quarterly audits. What that means is in the first three quarters of this year, we have taken each quarter's share of profit from the policy holders P&L. That is why Q4 is not comparable, it is much smaller number for the life insurance company and hence overall affects Bajaj Finserv's Q4.However, this equalises on a year-on-year (Y-o-Y) basis and that is why if you see on a Y-o-Y basis, life insurance is slightly up but more importantly it is the best ever year in terms of profit after tax (PAT) for our general insurance company, for Bajaj Finance as well as for Bajaj Finserv on a consolidated basis.Reema: Let me ask you a bit about Bajaj Finance. While it is still a very healthy growth rate that you have clocked in, it is lower than the 50 percent growth rate that you have seen in the past. Could you explain that? Also one line on the additional provision that you have taken for Bajaj Finance for one of the accounts?A: We have always said that after initial years of very strong growth as now are different lines and segments are maturing, we are looking at 20-25 percent growth rate Y-o-Y as a more steady growth rate.There are better years and there are other years, which could be slower because we will always be conservative when it comes to taking a look at credit quality in the system. Now compared to the 50 percent, which we have done in past years -- we have even done 60-70 percent -- I even think today 35 percent is a great growth number and for the year, it is over 40 percent. This is a combination of moving parts.Our consumer business is growing very strong, 40 percent Y-o-Y but it is a very short duration loan. It is mostly four-five months on book whereas our mortgages ends up being much longer, these are 7-8 years loans. So as the mortgage, the commercial book grows, naturally it drags the overall growth rate down even though it creates a much more strong and solid business.As far as the extra provision is concerned, this is just being quite conservative, where we look at the external environment and this is one of our old infra business, we have decided just to be ultraconservative and go even beyond what we are normally required to make this additional provision.Latha: You are firing on all cylinders, which will be the next big leg of growth, should we expect more of the same, your non-banking financial companies (NBFC), your insurance going by about high single digits, is this the way we should expect?A: As far as the NBFC is concerned, given the fact that we are now present across consumer, SME, rural, commercial and the value added segments, I believe that to get to this 20-25 percent growth for the next few years clearly is possible. We have the flexibility because across these five segments, we are in 32 different product lines, we have the flexibly based on how the market is growing to decide where to accelerate and where to decelerate.The general insurance company over the last 18 months has spent a lot of time and effort building a completely new channel which is a virtual sales channel. As this grows, you will start seeing disproportionate growth coming in over there but we have to keep in mind that just growth is not what is enough. Look at a combined ratios, our Q4 combined ratio is around 94 percent. This is by far 20 percentage points better than the industry average. To be able to get industry growth rates or little higher than that at a profit which the industry can only dream about, this is what is truly exceptional.The life industry has been quite slow and we have been very slow over the last few years and with the channel opening up to multiple relationships, this is a big effort that we are working on. I am sure many others are also there on our boat. We have revitalised our energy and I think towards the end of this year, we should start see the result of that. You have seen some amount of new business growth last year 8 percent, very small, still compared to industry growth of 20 percent but hopefully in this year itself you will see new strong growth coming in life, that is where a lot of the current focus is going.Reema: There was certainly dissonance in terms of them wanting to up their stake, where do things stand over there? Are they looking to up their stake, are you willing to let them?A: These are all guesses that the media is making. All I can say right now is that we are in discussions with them and these discussions are happening, they were here just last week for our results. We spent time with the senior management. So all the discussions are happening very cordially but naturally these are large investments to be made even for them or for us, whoever it be and that is why this takes time. I realise that many others have already gone ahead and done it and that is why probably the media is wondering why we have not. We will hopefully hear something in the coming months but there is nothing beyond that I can say.What Allianz has to say, you will need to check with them.Latha: Will it be a sell of share by you, will it be new share issue?A: We are discussing all options and that did not come to any particular option or decision. So it would be wrong for me to comment on that but I can only say that if you look at both our insurance companies, we are very adequately capitalised. So it is unlikely to be that the company will issue new shares if we go down that route.