Siddhartha Mohanty, Chairperson, LIC, says “for nine months, VNB margin is 16.6% 200 basis points growth we have given year on year. But for Q3, it is 20%. That is because of this product, Jeevan Utsav. Since this is just the beginning, one month only December, so January, February, March, my sense is this will continue and it is sustainable.”
Do you watch your stock price movement? Does it give you confidence now that even in the stock price, the actions which you would have taken are reflected now?
Siddhartha Mohanty: I must thank my investors for reposing faith in LIC. We are into our work. We are into fulfilling our commitment which we gave at the time of listing to all our customers, to all our investors. We are delivering in line with our commitments. Even more than commitment, whatever we are delivering, that is more than our commitment. In the coming days also, this will continue.
Coming to numbers, net profit has shown a decent growth. Can you please highlight which segment has been the main contributor?
Siddhartha Mohanty: We changed our product line. Whatever commitment we gave, we had more non-par products. Non-par products, which will take care of customers first because customers will get good return and after that, all other stakeholders. Those products are giving good returns and are getting traction in the market. Last quarter, we launched a product on November 29, Jeevan Utsav. That has got traction and gave good results during last quarter. In one month, that gave good results.
You had deliberately shifted towards non-par where the margin is greater; 14% share is already there. How much more do you aspire for? Will there be increased focus on this segment in coming quarters as well?
Siddhartha Mohanty: At the time of listing, we had a target and we have been told at least 15% non-par share in AP will be there. If you observe this movement, it started with 7.12%. Then next year it went to 8.89%, then 14.04%, 15% and definitely by March, it will be more than our commitment. So, in recent times, we will surpass our commitment.
Talking about VNB margins, which has been something you promised along with industry, you will also grow. But if you see the timeline, that has happened at least two years before your commitment. Now at 20% VNB margin, will the Q3 number be sustainable in coming quarters as well?
Siddhartha Mohanty: You see, for nine months, VNB margin is 16.6% 200 basis points growth we have given year on year. But for Q3, it is 20%. That is because of this product, Jeevan Utsav. Since this is just the beginning, one month only December, so January, February, March, my sense is this will continue and it is sustainable.
If you talk about the product mix, can we expect some more changes down the line?
Siddhartha Mohanty: We launch products depending upon the market need, need of our customers. It is a continuous process. In the coming days also you will observe that we are going to launch one product for the children’s segment. Already this Jeevan Utsav has been launched. For senior citizens, Jeevan Dhara 2 pension product, a deferred annuity product has been launched. For youngsters, those who are more into the share market, we have launched LIC Index Plus. So all product gaps have been fulfilled and will cater to the needs of all segments of the society by delivering good competitive products.
One thing I want to understand is that while you report your embedded value numbers every six months, and last was till September, is it a fair assumption considering the market conditions that embedded value would have gone up in proportion to what is happening around?
Siddhartha Mohanty: That you can guess, I need not tell you but my sense is there will be definite improvement upon whatever you saw in September.
Okay, so that is something shareholders can definitely expect. One, you have also given an interim dividend this time, and last time also this was Rs 3 per share. When shareholders look at LIC, what more should they expect from the company, which they were waiting for since IPO?
Siddhartha Mohanty: My objective is to create value for all my shareholders. And in that direction we are working and you see the result. So they have reposed confidence in LIC, and that will continue. That will continue and I expect them to continue their trust in LIC and bless.
So shareholders can definitely expect more. How has the commission ratio panned out? What should be the expectation?
Siddhartha Mohanty: Commission will be stabilised, because it depends on the product. If you have a non-single product, the commission rate is more than a single premium. So if you see the balance, both single and non-single, we see some impact on single. Non-single has grown drastically, which was not there in Q1 and Q2, but Q3 improvement is there. So my sense is the commission rate and commission expenses will stabilise, it will not be very less or very high growth will not be there. It will commensurate with business growth, premium growth.
What is your strategy? Is it more of an expansion in terms of volume and the commission should remain stable? How do you see that?
Siddhartha Mohanty: Once volume goes, commission will also go up because the rate for each product is already decided. So if you sell more, obviously volume will be more. Total amount of commission will be more.
Is the company doing more operational expenditure because you are expanding a bit, you are also spending on digital infrastructure, if you can talk about it?
Siddhartha Mohanty: Digital, we have taken a digital transformation project in the current year. We call it a project DIVE, that is Digital Innovation and Value Enhancement. A global level consultancy firm is guiding us. And already three, four months of work have been done. They have done some gap analysis. And milestones have been defined now vendor engagement and actual work will start. So at regular intervals, some milestones will be achieved. That will help not only customer acquisition, but also enter servicing, lifespan of policy, policy stays for 20, 25 years, so whole life.
So many servicing needs are there. Everything will be taken care of by this digital transformation project. And we already have one mobile app for our customer acquisition agents. We have empowered our agents through the Ananda app. Last year, we completed 8,11,000 policies through this app. No paperwork, no wet signature, customer at his place, agent at his place, matter of 10 to 12 minutes, starting from on-boarding, EKYC verification, RTGS NEFT payment, underwriting policies, 10 to 12 minutes.
We completed 8,11,000 policies last year. This year, up to December, we have already crossed 7,45,000. In March, it will be much more. But the objective is to further scale it up because we sell more than two crore policies every year. So the objective will be to totally scale up and finally 100% should come through digital channels. So no paperwork is our objective.
When you say 100%, when do you think that will be implemented? How much time? Two to three years?
Siddhartha Mohanty: That will take time, 100% will be difficult. But the objective should be as much as possible through digital, no paperwork.
When will the DIVE implementation be completed?
Siddhartha Mohanty: It is a 18-24 months project.
So that should be fully implemented.
Siddhartha Mohanty: Three months already over and they are working day and night. And also, it is being monitored by our board, as well as department financial services. They are also monitoring this DIVE project regularly. What is the progress? All those things are there.
Because it will enhance your operational efficiency.
Siddhartha Mohanty: Yes, yes. Yes.
Equity investments is something which is keenly watched by the market because wherever LIC invests, even your stock exchange notifications. Last I saw you investing in HDFC Bank, up to 10%. How much of that investment has yielded, if you talk about the quarter gone by. It was not just HDFC Bank, there were other banks as well. What is the intention of LIC?
Siddhartha Mohanty: These are all enabling provisions. We have taken permission, not only for this bank, but two other banks also. The objective is to be able to invest at an appropriate time because there is already a cap. We cannot go beyond that even if there is market opportunity due to regulatory restrictions. So for that, we have taken these approvals. So far as equity investment is concerned, our investment will be a little less than 4% of total India’s market cap. We continuously invest in the equity portfolio. Out of total AUM, it will be roughly 20 to 25%.
What is LIC doing currently? Market is on fire. Are you waiting on the sidelines, booking profits? What is the strategy now?
Siddhartha Mohanty: It is a mixed strategy. You see, I cannot always book a profit, I have to also increase my portfolio. So depending upon our investment strategy, all these things we take call. And we have a very balanced approach. Not that we take total advantage or we keep quiet. It is a balanced approach so that sustainability is maintained.
How often do you watch the stock price? Is it a regular part of your day routine?
Siddhartha Mohanty: Sometime we watch in the office because the TV is there.
But does that give you confidence, especially in the last three months?
Siddhartha Mohanty: Obviously when my stock goes up because now people are reposing faith in LIC. And we expect this to continue.
(You can now subscribe to our ETMarkets WhatsApp channel)