Why do you like life insurance? Growth is not just there. No growth.
Rajesh Bhatia: I’ll tell you why I love life insurance. See, this is a very unified business. You can see that the top four companies that are eating in the market share of LIC are all banks and they are definitely doing a kind of work as long as both insurance premiums are relevant as well as the value of a new business, you can tell it, profit, they are doing well on both fronts.
The valuation has come down due to severe concerns over the regulatory aspects, so bows, all aspects, challenges on the bank’s assurance whether the channel will cut for some of these banks. All those regulatory concerns are now behind us.
So, I mean when you have your AP as well as VNB. You move both which are the topline and the bottom line that will move very well and by the way, the evaluation has come to a very attractive level. You see these stocks, they haven’t done much in the last few years. So, I mean that the regulatory overhang comes to a certain issue till the end point, now I mean for these companies to grow again and as I said, you have enough market share of LIC.
What about normal insurance, health insurance? Is one of the shares listed. Now, FDI has been approved, so there may be some triggers and M&A.
Rajesh Bhatia: So, I am a little less enthusiastic about normal insurance, though I like some companies there. But I will say less enthusiastically about healthcare, which has given some challenges that the sole health insurance that faces a single health insurance is less enthusiastic about. Also, on normal insurance that includes motor insurance, etc., it requires a motor volume to do well that you will move forward and reprimand the third party insurance as soon as they proceed.
Saying, this is all a very good franchise and they will do good for a long time, but in the context of the general against life, I would say that at the moment my money is on life insurance.
As you examine the future, you think this market will be challenged by PE multiples, where growth can be disappointed, margins may be disappointed, or can it affect PE multiples to the pure market of other fields?
Rajesh Bhatia: Therefore, as long as the PE multiples are concerned, the challenges are not so domestic. It will become more challenges globally. As we speak, we probably earn 19 or 20 times 27. But one of the concerns that emerges globally is capital. The Mother Market is really America, and long -term yields are coming down.
Now, fortunately, they are 4.5 and 5% or 30 years for 10 years. But what if they go high?
It is your risk -free rate. If your risk of return increases the free rate, it is also in terms of DOLLAR LOVE, then ask for equity IRR goes ahead. As the interest rate actually increases, what is supposed to happen is to come down. Therefore, my understanding is that the risk of a PE ratio or the risk of a contract is actually the task of how you see the cost of capital activity.
At the moment, they are not at the emergency level when they are rising, they are not at the emergency level and because of which our markets are not reacting dramatically. But if it is to move significantly, we will become the main idea of the rising price earnings.
You said you’ve taken some chips from the table in private banks, why would you do it because the numbers are ok for PSU banks. I see SBI, good numbers. I see Bob, not so large number. You are selling an area where growth is very appropriate.
Rajesh Bhatia: No, you are right. I don’t say I am a bearish on private sector banks. I am just taking some chips from the table, seeing how well they have done and my view of this private sector banks, especially some who have done very well for the financial year 26.
The private banks we talk to are assuming another 50 basis points. Some economists really believe that we are in such a deflectionly environment that you really can cut more than another 50 basis points we are imagining. If that was the case, what would happen is that banks would take time to adjust their wealth books as wealth books will rebuke the books very quickly because they are based on the external borrowed rate.
Therefore, if the repo rates are going down, they will have to rearrange their asset book very quickly and which means that their NII, net interest income, will not increase at attractive rates. Given that the credit price can increase a bit rather than you move, I mean profit growth will be animaq for next year, which lasts only 27 in FY 26. But I mean that this is now 2.8-3 times for a book value, I mean I mean some money from the table where I see more value.
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