HDFC Life’s management said that a meaningful short-term margin hit is expected from the recent GST change but expressed confidence in offsetting the impact over the next few quarters through a mix of repricing, cost negotiations, and product realignment.
During the Q2FY26 post-results analyst call, the management said the insurer is already working on multiple levers to “neutralise” the GST-related cost increase. “It’s not just the distributors who will bear the brunt. We are taking an equitable approach across all stakeholders: distributors, vendors, and even our internal cost structures,” she said.
The company expects roughly half of the input tax credit loss to stem from commissions, with the rest linked to outsourced services, technology, and vendor costs. HDFC Life is holding discussions with distributors and vendors to share part of this burden. “We’ve done it before in other instances, such as surrender charges, and we’ll be pragmatic again,” management added.
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Besides cost-sharing, the insurer plans to tweak its product mix towards higher-margin offerings, including unit-linked products with greater mortality and rider components, and explore new products like variable annuities to lift profitability. “Every product has some further margin we can extract,” management said.
The management indicated that while the GST shock will weigh on value of new business (VNB) margins in the near term, the normalization should be visible by the end of FY26. “We aim to wrap up the necessary adjustments within two quarters,” said HDFC Life. “By the end of FY26 or early FY27, we expect to be back at our desired VNB margin run rate.”
Quantifying the impact, the management said the gross margin hit from GST is about 3 percent on an annualized basis, corresponding to around 0.9 percent in the September quarter and 0.5 percent for the half-year. “That ties in with our acquisition expense sensitivities,” they noted.
On a product basis, HDFC Life said unit-linked products face the largest GST drag due to the cap on charges, while non-par and protection products are relatively less affected.
Despite the near-term pressure, management remains optimistic that strong growth momentum especially in individual term and protection segments, which saw over 50 percent growth in September will cushion the overall impact.
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