Max Financial Services Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Growth well ahead of the market: Individual adjusted FYP grew 18% in H1, more than double the private sector's 8%, while private market share improved 83 bps to 10.1%.
• Margin expansion despite a GST headwind: VNB margin rose from 23.6% to 25.5% YoY in Q2, even as GST credit disallowances imposed a 300-350 bps run-rate drag. Management is holding its full-year 24%-25% margin guidance.
• Product mix shift is the margin engine: Non-par savings, protection (34% growth), and annuities (122% growth in Q2) are expanding margins, while the ULIP mix at Axis Bank was consciously reduced from 60%+ to ~50%.
• Proprietary distribution is scaling fast: The proprietary channel delivered 22% APE growth in Q2 on a 3-year CAGR of 39%, with the agency force now at ~1.42 lakhs. Operating leverage from this channel is still to come.
• What to watch next quarter: Whether the H2 acceleration promised from Axis Bank materialises, how much of the 300-350 bps GST drag gets offset by product mix versus commission renegotiations, and if the opex-to-GWP improvement trend holds.

Growth & Channel Performance

• Broad-based outperformance: Q2 individual adjusted FYP grew 14%, with APE up 15%, both well ahead of private and industry benchmarks. The 2-year CAGR of 24% also outpaced private (16%) and industry (11%).
• Proprietary channel as a structural moat: Offline proprietary grew APE 26% in Q2, online 14%, overall 22%. The agency force has more than doubled from ~61,000 in FY22 to ~1.42 lakhs, supported by 150 new branch units over three years.
• Partnership channel diversifying: Partnership business grew 10% in Q2 APE terms. New banking and broking partnerships now contribute ~5% of individual APE, with counter share in all new banca partnerships well over 25%.
• Axis Bank channel at an inflection point: Growth was a deliberate 7% while the product mix was corrected away from ULIPs. Digital initiatives and a transformation project are now in place, and management expects a much faster H2.
• NRI segment steady: Contributes about 13% of total sales with consistent performance. GIFT City office approval (SEZ, IRDAI NOC, provisional IFSCA approval) positions the company to expand this franchise.

Sumit Madan: "I am actually very confident of doing much more in H2 coming from Axis Bank compared to what we did last year because all the ingredients are right now in place."

Margin Walk & GST Impact

• The GST headwind is material: A September regulatory change disallowed GST credits on certain expenses, affecting ~75% of that month's sales. The run-rate impact is 300-350 bps on margins, with ~0.6% realised in H1. A further INR268 crore was taken as a one-time EV hit on the back book.
• Offset strategy is multi-lever but unquantified: Management cited cost optimisation, product tweaks, product mix shifts, distributor renegotiations, vendor renegotiations, and outsourcing decisions. It declined to split how much of the offset comes from product mix versus commission support.[12-13]
• Product mix is doing the heavy lifting on margins: VNB margin improved from 23.6% (Q2 FY25) to 25.5% (Q2 FY26), and H1 margins from 20.2% to 23.3%. This was largely product mix led, with protection, non-par savings, and annuities all contributing. Operating leverage was not a big factor yet.
• The divergence in GST impact versus peers: The INR268 crore EV hit (~110 bps of opening EV versus peers at 40-50 bps) reflects a product mix skewed toward traditional products, which carry intrinsically higher renewal commissions. The estimate is conservative, with no assumption of persistency improvement or rider attachment upside. [14-15]
• Opex-to-GWP ratio improving: GWP grew 18% while opex grew 11%; management expects this trend to persist for the full year, providing a secondary margin tailwind as proprietary channels mature.

Amrit Singh: "Despite this impact through a series of actions on costs, product mix, execution, we are confident that we will maintain the margin guidance that we had given earlier of improving the margins from the previous year and be in the range of 24% to 25%."

Product Mix & Protection

• Protection is scaling across all channels: Pure protection grew 34% in H1, attaining the highest market share, with growth coming across Axis Bank, other banca partners, and all proprietary verticals. Retail protection and health contributed 13% of sales with 36% growth.
• Annuities are a breakout category: The annuity business grew 85% in H1 and 122% in Q2, reflecting early success in the longevity segment, which management views as underpenetrated and margin-accretive.
• Non-par savings gaining traction: The Smart VIBE product launched in Q1 is performing strongly, contributing to the non-par savings momentum that helped expand margins.
• Group credit life building: Group credit protection grew 24% in Q2, with new partners added in H1 and disbursement cycles now kicking off. Management is hopeful of entering new spaces and lifting Axis Bank credit life counter share to 65%-70% over time.[13-14]
• Rider attachment improving: The rider attachment rate reached 37%, supporting both customer value and margin profile.
• ULIP mix deliberately reduced: At Axis Bank, the ULIP mix was brought down from 60%+ to ~50%. Management sees no need to reduce it further; the mix is balanced, though some participating product launches could cause quarterly variances.

Digital & Operational Efficiency

• Digital platforms scaling with high engagement: The mSpace platform scaled to all proprietary channels and Axis Bank with ~90% adoption. Sales Navigator is used by over 75% of the sales force. Digital platforms achieved industry-leading NPS scores (website 71, e-commerce 77).
• AI is reducing cost and friction: An AI-driven income estimation model allows 30% of the term portfolio to undergo financial underwriting without physical documentation. Converse Pro handles 30% of customer email volume, yielding a 20% reduction in support headcount.
• GenAI pipeline building: The Ely virtual HR business partner engages ~17,000 front-line sales employees. A GenAI immersion program identified 30-plus high-impact enterprise use cases to be deployed over the next two years.
• Customer metrics improving: 13-month persistency at 83%; 25-month persistency at an all-time high of 76% (up ~500 bps YoY). NPS improved to 57 from 52 at FY25 exit. Grievance incidence rate improved to 38 from 45 YoY.

Financials & Solvency

• EV growth solid, with a GST caveat: Embedded value reached INR26,895 crore, up 15% YoY, after a one-time GST impact of INR268 crore on the back book. Annualised operating ROEV was 16.3%.
• MFSL PAT decline is accounting-driven: Consolidated PAT of INR92 crore was lower YoY primarily due to fair value changes under Ind AS and the GST expense. Axis Max Life IGAAP PAT dropped from INR231 crore to INR149 crore (an INR82 crore drop); the residual decline is from Ind AS mark-to-market movements.
• Solvency strengthened: Additional INR800 crore of sub-debt was raised with IFC as a strategic partner, strengthening the solvency ratio to 208%.
• Operating ROEV outlook comfortable: Management is comfortable remaining in the 18%-19% range over the next 2-3 years.

Strategic Positioning & Margin Philosophy

• The ambition is a breakout number three: Management's stated short-term goal is to take a significant lead as the number three player in the market, with continuity of leadership and strategy cited as a differentiator.
• Margin ceiling is self-imposed: Management views 25% as a steady-state margin number. If margins rise beyond that range, the intent is to reinvest the excess into distribution augmentation rather than let margins drift higher.
• Three structural opportunities: The licence permits disciplined savings, mortality/morbidity, and longevity. The latter two are underpenetrated, less competed, and offer a better margin profile. Building these mixes is the core of the margin strategy.
• Proprietary channel economics still improving: In proprietary channels, scale creates operating leverage, and sales-force productivity outcomes are improving year-on-year. The investment phase of the last couple of years is expected to yield operating leverage as the channel matures.

Amrit Singh: "The way we think about margins is we feel 25% is a good steady number. If the number kind of increases beyond that particular range, we were very keen in throwing that back as investment so as to augment and build distribution."

Guidance & Commitments

Key Metrics