Bajaj Finserv Stock Falls 2% on ₹26% Stake Acquisition from Allianz

Bajaj Finserv’s share price witnessed a notable drop of nearly 2% on Tuesday after the company announced that it had entered into agreements to acquire Allianz SE’s 26% stake in its insurance subsidiaries — Bajaj Allianz General Insurance Company (BAGIC) and Bajaj Allianz Life Insurance Company (BALIC).

The stock opened lower and fell as much as 1.90% during intraday trading, reaching a low of ₹1,836.15 per share on the Bombay Stock Exchange (BSE). This decline came in response to Bajaj Finserv’s official statement regarding the signing of Share Purchase Agreements (SPAs) to buy out Allianz SE’s holdings in both its life and general insurance businesses.

With this transaction, Bajaj Finserv aims to consolidate its ownership in BAGIC and BALIC, reinforcing its strategic control over its insurance operations. Allianz SE had been a joint venture partner in both businesses since their inception, holding a significant minority stake. The move is seen as a strategic step by Bajaj Finserv to strengthen its position in the Indian insurance market and exercise greater operational control over its insurance arms.

The details of the financial terms involved in the acquisition have not yet been fully disclosed. However, market participants appeared cautious following the news, which was reflected in the stock’s performance during the trading session.

Following the acquisition of Allianz SE’s 26% stake, Bajaj Group is set to increase its ownership in Bajaj Allianz General Insurance Company (BAGIC) and Bajaj Allianz Life Insurance Company (BALIC) from the current 74% to full ownership. This means that Bajaj Group will now hold a 100% stake in both of its insurance subsidiaries, consolidating complete control over their operations.

Previously, Allianz SE, the German financial services giant, held a minority 26% stake in both BAGIC and BALIC as part of a joint venture with Bajaj Group. The acquisition will effectively make Bajaj Group the sole proprietor of these insurance businesses, giving it greater strategic and operational flexibility.

By increasing its stake to 100%, Bajaj Group will now have full authority over decision-making processes, business strategies, and future growth initiatives for both its general and life insurance divisions. This move is expected to provide Bajaj Group with greater autonomy in shaping the direction of its insurance businesses, enhancing its ability to respond swiftly to market dynamics and customer needs.

The consolidation of ownership marks a significant milestone for Bajaj Group in its journey within the insurance sector, strengthening its foothold in a highly competitive market. The financial details and timeline of the transaction have not been fully disclosed yet, but the acquisition positions Bajaj Group for greater control and potential long-term strategic benefits.

Bajaj Finserv has disclosed that the total consideration for acquiring Allianz SE’s 26% stake in its two insurance subsidiaries — Bajaj Allianz General Insurance Company (BAGIC) and Bajaj Allianz Life Insurance Company (BALIC) — amounts to ₹13,780 crore and ₹10,400 crore, respectively. The announcement was made through a regulatory filing on March 17.

The acquisition will mark the end of a longstanding partnership between Bajaj Group and Allianz SE in the insurance sector. The joint venture agreements, which have been in place for 24 years, will officially terminate upon the completion of the initial tranche of the acquisition. This first phase requires the purchase of at least 6.1% of the stake, after which Allianz SE will no longer be classified as a “Promoter” and will instead be reclassified as an “Investor.”

According to the terms outlined in the Share Purchase Agreements (SPAs), the 26% stake acquisition will be distributed among three entities within the Bajaj Group. Bajaj Finserv itself will acquire approximately 1.01% of the stake, while Bajaj Holdings and Investment Ltd. will take on the largest portion at approximately 19.95%. The remaining 5.04% will be acquired by Jamnalal Sons Pvt. Ltd., a key investment vehicle within the Bajaj Group.

This strategic realignment will result in Bajaj Group gaining full ownership of both BAGIC and BALIC, increasing its stake from 74% to 100%. By consolidating control over its insurance businesses, Bajaj Group is expected to have greater flexibility in decision-making and operational management. The financial outlay for the acquisition underscores Bajaj Group’s commitment to strengthening its position in the competitive insurance market.

The completion of the acquisition process is subject to regulatory approvals and other customary closing conditions. Once finalized, Bajaj Group will have full strategic and operational control over its insurance subsidiaries, positioning it for greater independence and potential growth in the sector.

Following the completion of the acquisition, Bajaj Finserv’s ownership stake in both Bajaj Allianz General Insurance Company (BAGIC) and Bajaj Allianz Life Insurance Company (BALIC) will increase to 75.01%. This increase in stake will give Bajaj Finserv a controlling interest in both insurance businesses, further strengthening its position within the group’s broader financial services portfolio.

The acquisition, however, remains subject to necessary regulatory approvals before it can be finalized. Bajaj Finserv has stated that it will need to secure approvals from key regulatory bodies, including the Competition Commission of India (CCI) and the Insurance Regulatory and Development Authority of India (IRDAI). These approvals are essential to ensure that the transaction complies with competition laws and regulatory requirements governing the insurance sector in India.

The process of obtaining these approvals may involve a detailed review of the terms and structure of the acquisition to assess its potential impact on market competition and policyholder interests. Once these clearances are obtained and the transaction is formally completed, Bajaj Finserv will hold a decisive majority stake in both insurance subsidiaries, positioning the company for greater strategic and operational flexibility in managing its insurance businesses.

Deal Valuation Overview

According to a report by Kotak Institutional Equities, the acquisition deal values Bajaj Allianz Life Insurance at approximately ₹40,000 crore. This translates to a valuation multiple of 1.4 times the estimated embedded value (EV) for the financial year 2026 (FY2026E) and 1.3 times the estimated EV for FY2027E. In comparison, some of Bajaj Allianz Life’s key industry peers, such as Max Life and SBI Life, are currently trading at higher multiples of 1.7 times EV for FY2026E and 1.4 to 1.5 times EV for FY2027E. Meanwhile, HDFC Life is valued at even higher multiples of 2.1 times EV for FY2026E and 1.8 times EV for FY2027E.

Kotak Equities has indicated that the deal valuation for Bajaj Allianz Life Insurance is significantly lower than its internal fair value estimate of ₹55,800 crore, which corresponds to a multiple of 1.8 times EV. This implies that the transaction is being executed at a 28% discount to Kotak Equities’ estimated fair value for the business.

On the general insurance side, Bajaj Allianz General Insurance has been valued at approximately ₹53,000 crore under the terms of the deal. This corresponds to a valuation of 25 times the estimated earnings and 3.8 times the estimated book value for FY2026E. In comparison, ICICI Lombard, which is considered the closest peer in the general insurance segment, is currently trading at higher multiples of approximately 29 times earnings and 5.1 times book value for FY2026E.

Kotak Equities has attributed Bajaj Allianz General Insurance’s relatively lower valuation to excess capitalization, which has weighed on profitability. In contrast, ICICI Lombard is expected to generate a higher return on equity (RoE) of around 19%. Kotak Equities’ internal fair value estimate for Bajaj Allianz General Insurance stands at ₹57,500 crore, suggesting that the deal’s valuation reflects an 8% discount to their calculated fair value for the business.

Overall, Kotak Equities’ analysis highlights that the acquisition is being executed at a discount compared to both internal fair value estimates and the prevailing market valuations of comparable peers in the life and general insurance sectors.

Rating Downgrade and Stock Performance Overview

Kotak Institutional Equities has revised its outlook on Bajaj Finserv’s stock, downgrading the rating from ‘Buy’ to ‘Add’. The downgrade reflects the brokerage’s view that the potential for further upside in the stock may be limited following the company’s acquisition of Allianz SE’s stake in its insurance businesses. Despite the downgrade, Kotak Equities has raised its price target for Bajaj Finserv’s shares from ₹2,000 to ₹2,100, suggesting a more moderate growth expectation in the near term.

Bajaj Finserv’s Stock Price Performance

Bajaj Finserv’s share price has experienced mixed performance in recent months. Over the past month, the stock has declined by more than 2%, reflecting some investor caution following the acquisition announcement and broader market trends. However, the stock has shown solid performance on a year-to-date (YTD) basis, gaining approximately 17% since the beginning of the year.

Looking at a broader time frame, Bajaj Finserv’s shares have appreciated significantly over the past two years, rising by approximately 42%. The stock’s long-term performance has been even more impressive, delivering a return of approximately 192% over the last five years, making it a strong performer in the financial services sector.

During intraday trading on the Bombay Stock Exchange (BSE), Bajaj Finserv’s stock was down by 1.37% at ₹1,846.15 per share as of 10:15 AM. The immediate decline in the stock price following the announcement of the acquisition and the rating downgrade reflects a cautious market response, as investors digest the long-term strategic implications of the deal and its impact on Bajaj Finserv’s financial position.

Kotak Equities’ revised outlook underscores the market’s mixed sentiment, balancing the strategic benefits of the acquisition against the near-term financial impact and the current valuation levels.