We are open to evaluating acquisition but will be selective of what we buy, says HDFC Life chief

“I would expect the industry to grow by 10 per cent to 15 per cent, but we will outpace the industry,” says Vibha Padalkar, Managing Director and CEO, HDFC Life Insurance. She also said that the insurer has the war chest for an acquisition, but they will be selective on how to use it.

In an interview to BusinessLine, Padalkar said that the insurer has been conservative about its investment, and could foresee the asset-liability mismatch in the NBFC sector. Excerpts:

What is your growth target for 2019-20?

We had a very good first quarter on the back of a high base last fiscal. Over the next three years, we would expect to grow by 2 to 2.5x GDP, or at a CAGR of 15 per cent to 18 per cent. We should continue to be the most profitable insurance company with a very stable growth on both top line and bottom line. Our market share in the first four months of the fiscal has increased by 400 basis points.

What are your key focus areas this fiscal?

We want to continue to be an innovator on products. We have a few more with the regulator and are awaiting approval in a quarter or so, hopefully.

Second, is our focus on technology and innovation — we have more than 150 bots for not only answering our standard customer queries, but also on how we can up sell and cross sell to the customer.

Third, we will continue to look at new ecosystems like Paytm, Uber, Ola, Airtel, Healthspring for bite sized products, ease of on-boarding and tapping into younger consumers.

How has the reduction in stake by Standard Life impacted the company?

Standard Life has been our promoter been for 20 years. We, along with HDFC AMC, are a significant portion of their market cap. So, in all probability, they will want to monetise further and sell down. But that is really up to them. They have had two offers for sale, and the more recent block sale. Whether they will sell more is their call, but my guess is that it is possible.

Is HDFC Life open to acquisitions? What happened to talks with Max Life?

We continue to be interested in evaluating any acquisition. We have the currency, or war chest, to make acquisitions, but we need to be selective about what we use it for. We have to be clear about what we are buying. There there has to be good distribution, we also need to be very comfortable about the quality of the embedded value (EV) or the quality of the business they have already underwritten, as well as, the bid range. So if it is unrealistic, then rather than shelling out that money to buy a new business, why not invest it in our own business to grow organically?

We are not in discussion with Max Life. If they come back on the table, we will be happy to evaluate it afresh.

Does HDFC Life have any exposure to the troubled NBFC companies?

Fortunately for us, our bottom-up investing based on fundamentals of each stock has helped us. We have no major exposure on any of these troubled names.

Rather than just getting swayed by something trending in the market, we look at the fundamentals, demand, corporate governance, promoters. There are certain companies we have stayed away from, and that has also worked well.

96 per cent of our fixed income portfolio is in Government bonds or AAA-rated securities. What we found was that anyone with access to ₹300 crore to ₹400 crore was setting up an NBFC. We knew that they were lending for the long term and borrowing for the short term. We also work closely with banks and other lenders through our credit protect book. So we know the sector well.

Will the HDFC and Apollo Munich deal impact HDFC Life?

No. But coincidentally, we do have a ‘combi’ product, where we sell our term along with Apollo Munich. That will just translate into a combination of us with HDFC Ergo.