00:00 Welcome to NDTV Profit, where we are speaking with regard to earnings to Star Health.
00:06 They've come out with their numbers and it's a decent-ish set, largely in line.
00:12 Let's bring on board Mr. Nilesh Kamble, who's the CFO at Star Health, to try and
00:18 break those numbers down, give it some perspective, as well as give us
00:22 some guidance with regard to where we can see the numbers for FY25.
00:26 Good afternoon. Welcome, Mr. Kamble.
00:29 Good afternoon.
00:30 So, sir, break this for us. You've hiked the price of your Premier or one of your
00:41 largest products by 25% odd at the very start of this financial year. So break that down for us.
00:48 How are trends shaping up for you post the price hike? That's one. Second, how have you done with
00:55 regard to volumes, with regard to value, you've done 18% on your top line, but with regard to
01:00 volumes, how have you done? Yeah. So in terms of price increase, we have taken a price increase of
01:07 25% for our flagship product and it is going in line with our expectation. It has seen a good
01:13 progress in terms of renewal of our existing customers. For new customers, we are offering a
01:19 new product, which is Star Health Assure. So the overall price increase is well received by the
01:24 customer segment and we are doing well on it. So this was done on 1st May 2023. It will continue
01:32 up to 30th April. So we are 11 months into the whole price increase journey and it is in line
01:37 with our expectations. In terms of the second question was, sorry. Yeah, with regard to FY25,
01:47 so first one was with regard to how the price increase has been accepted by customers. The
01:52 second one is with regard to volumes, how have you done? Yes. So if we split this growth into
01:59 value and volume of 18%, around 25 to 30% is volume growth and the balance is value growth.
02:06 So this year was an exception where we had taken a substantial price increase.
02:10 We believe for the years to come, the volume and value growth will be in the range of 50%.
02:15 Understood. And with regard to FY25, what's the kind of growth number you're looking at?
02:19 See, the objective is to grow higher than the market growth rate. We expect the market to grow
02:25 in mid-teens range and we are growing higher than the market growth rate and we continue to improve
02:29 our market share in the retail segment. In the group segment as well, we have very big plans.
02:34 Currently, we have 2% market share. Currently, we have grown by 34%.
02:38 This segment offers huge opportunity for growth because the pricing has been improving. In the
02:43 banker segment also, we have tied up with multiple partners and this is one segment
02:48 which we want to grow faster. Sorry, what segment were you alluding to?
02:52 The group segment. The group segment, correct. Yes, absolutely. I'll come to that.
02:57 And with regard to FY24, now this price hike etc. is now firmly behind you. So FY25,
03:08 I would have expected that momentum will build in an even more solid fashion for you.
03:16 Would you therefore aspire maybe more than market, maybe at least for FY25,
03:24 given that there is this stability? Absolutely, yes. So we aspire to grow
03:30 higher than the market growth rate and we aspire to improve our market share. And this is across
03:34 channels. So, agencies are our biggest channel with 82% share. Banker and digital, we have grown
03:40 by 35% this year and we continue to grow higher than this for the years to come. Similarly, for
03:47 GMC, which is the group segment as well, which is the employer-employee segment, we aspire to
03:51 grow higher than the market growth rate. So all across business segments, we want to grow higher.
03:56 Understood. With regard to your combined, I'll switch to profitability.
04:04 The company had guided for a combined in the band of 92 to 95% for this year, at least that was the
04:11 aspiration. You've for the full year been around that band pretty much for all quarters. You are
04:20 at the lower end of the band for Q4. What is the FY25 thought process like? How would the combined
04:27 ratio shape up? Because that, in a sense, for viewer perspective, is what governs profitability.
04:34 That's correct. So for the full year, we have a combined ratio of 96.7%. For
04:40 quarter 4 alone, we have a combined ratio of 92.7%. So yes, whatever steps we have taken
04:46 are getting us good results. We have focused on growth with profitability. We have given up
04:51 certain businesses which were loss-making. Certain locations, we have discontinued the business,
04:56 which are giving us good results. During the year also, we had mentioned that the impact of fever
05:01 and infectious diseases during the period of September-October was very high, which led to this
05:06 higher loss ratio for us. We are definitely not happy with 96.7%. So both of the loss ratio and
05:13 expense ratio will continue to improve for FY25 and it will be closer to the range that we have
05:19 spoken before. Okay, and not improve that at all because in Q4, FY23, your combined was well below
05:26 the 92% mark. Yes, in Q4, there is seasonality in the business as well. So Q4, typically, we have
05:34 always said that it's the best quarter where the impact of fever and infectious diseases is lower.
05:40 That's the reason we have touched 93%. But during the year, there will be some quarters like Q2
05:45 or part of Q3, which has higher infectious diseases where the loss ratio is slightly higher.
05:51 But on an overall basis, during the year, we will operate in the range that we're talking about.
05:56 Understood. And how quickly would this be the normalized range or would you
06:02 aspire maybe in FY26-27 for this to come off further?
06:07 See, basically, this is the normal range that we'll try to operate it because it gives a very
06:13 healthy ROU of 20%. If we aspire to do less, we'll have to keep on increasing the price. That's not
06:19 the aspiration that we have. We want to be customer-centric with the affordability of
06:25 our products as well. And this combined ratio will ensure that we maintain the objective of
06:30 customer service and affordability as well as have a healthy profitability targets.
06:34 Sure. And this shrink from 96% to around 92% to 95%, this kind of shrink maybe of 3% to 4%
06:40 on average. Where would it come from? Would it come from expenses of management, which is currently
06:46 at 30% or within that 35% band? Or will it come from loss ratios?
06:52 It will come from both the segments. You know, loss ratios, there are a lot of claims initiatives
06:56 that we are taking in terms of project work on home health care, the fraud and abuse.
07:02 We are bringing in technology and digital initiatives on the cost optimization side.
07:07 Whatever spends we have done on technology, we are seeing some more benefits. We have a cost
07:12 optimization committee, which looks at each and every head of expenses. So on expense ratio,
07:16 we believe we can improve by 0.5 to 1%. Similarly, on the claims ratio with all the initiatives,
07:22 we will continue to improve. So the improvement will come both from the expense ratio as well
07:25 as the claims ratio. Okay, half to 1% improvement in EOM. And just give us some perspective.
07:32 You know, there's been plenty spoken about where expenses of management is concerned.
07:38 What's the kind of response from some of your peers, from some of your competitors with regard
07:44 to complying with expenses of management, because you are well in compliance. And I therefore want
07:50 to understand how the industry is shaping up and how the competitive intensity there is in terms of
07:56 both pricing as well as complying with EOM. Yeah, so this is the first year when this EOM
08:02 guidelines have been implemented. We see some action in the market where players are trying
08:06 to control. The regulator is coming up with the second set of regulations at the glide path,
08:12 which was there for three years, will now be reduced to two years. And players are asked to
08:18 come in within the bracket, which is prescribed by the regulator. So we see some pressure on the
08:24 competition who are operating above the 35% mark. That is where we see, we have the competitive
08:29 advantage with our expense ratio, which is way lower than the regulatory requirement. We have
08:34 the capability and the ability to go higher than the market. Got it. And just with regard to
08:44 how the pricing itself is shaping up, I want to try and understand that from your peers,
08:51 has there been a substantial increase even in their pricing? And do you see more increases to
08:58 come both in FY25 and 26? Or do you therefore now feel the pricing environment is starting to
09:03 stabilize? See, whatever pricing the industry players and we saw in the last year that was
09:10 post-COVID, you know, where there was an increased impact of inflation, that is where almost all the
09:15 players had to take a substantial price increase. We believe that this scenario will not appear
09:20 because now the inflation is pretty much under control. Players are taking action on that.
09:27 A large part of the pricing increase is taken and now this will be more episodic,
09:32 where based on the products which are crossing the threshold limits, the pricing increase will
09:36 happen. But it will not be on a very large scale, unlike last year. Okay, I want to also understand
09:42 that this engine with regard to group, how is it going to contribute to top line for you going
09:47 forward? On the retail side, you are suggesting you will grow at the market rate or just above it.
09:53 On group, how does that kind of shape your growth? In the group segment, currently we have 2% market
10:01 share. We want to focus on profitable groups as well as the profitable banker segment. So,
10:07 we focus on SME, MSME as well as mid-corporates as well. We see that the pricing in this segment is
10:12 improving with some of the PSU players are large corporates, where the loss issues have been higher
10:17 in the past. We see this as a very good opportunity areas for us to grow and we have good plans in
10:23 this segment as well. Understood. And with regard to the overall industry, what's your sense,
10:28 what's the growth number going to be like for FI25? See, as we said, the industry has grown
10:35 between 15 to 19% in the last 3 years. The last year was mainly because of the price increase
10:41 which many players have taken. We believe it should grow in mid-teens for the retail segment
10:46 and the group segment with improving pricing as well as addition of employees, it should be in a
10:51 similar range, 15 to 20%. Understood. Okay, thank you so much Mr. Kamli. It's been a pleasure
10:58 speaking with you and getting that perspective on Q4 as well as FI25. Thank you. Right, time to slip
11:04 into a very short break. More on the other side. Stay tuned to NDTV Profit.
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