Motilal Oswal Maintains Buy Recommendation for Niva Bupa, Price Target of Rs 97
Niva Bupa Reports Strong Growth in Net Earned Premium
Niva Bupa, a leading insurance company, has reported a significant growth in its net earned premium (NEP) for the fourth quarter of fiscal year 2026 (4QFY26). According to the company's latest research report by Motilal Oswal, Niva Bupa's NEP grew by 29% year-over-year (YoY) to INR19.7 billion, which is in line with the market's expectations.
For the fiscal year 2026 (FY26), Niva Bupa's NEP grew by 24% YoY to INR60.7 billion. The company's loss ratio, which measures the proportion of claims paid to premiums earned, increased by 40 basis points (bps) YoY to 56.8%. However, this increase was offset by improvements in operating efficiency, resulting in a combined ratio of 86.1% for 4QFY26, which is significantly lower than the estimated 94.9%.
Niva Bupa's operating expenses declined by 2% YoY to INR3.1 billion, beating market estimates by 24%. The company's commission ratio, which measures the proportion of premiums earned that are paid out as commissions, improved to 16.1% due to the passing of the Goods and Services Tax (GST) impact on distributors. The combined ratio for the year was 103.4%, up from 101.2% in FY25.
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Under the International Financial Reporting Standards (IFRS), Niva Bupa's combined insurance service ratio (CISR) improved to 97.4% in 4QFY26, up from 102% in 4QFY25. For FY26, CISR improved to 101.4%, up from 103% in FY25.
Earnings Outlook and Valuation
Motilal Oswal's research report has raised its IFRS profit after tax (PAT) estimates for FY27E and FY28E by 6% and 11%, respectively, driven by the company's improved performance across various parameters in 4QFY26. The research firm values the stock at 30 times FY28E IFRS PAT, resulting in a target price (TP) of INR97. Motilal Oswal has reiterate a "BUY" recommendation for Niva Bupa.
| Parameter | Actual (4QFY26) | Estimate | Change (YoY) |
|---|---|---|---|
| Net Earned Premium (NEP) | INR19.7 billion | INR19.7 billion | 29% |
| Loss Ratio | 56.8% | 60.9% | 40bps |
| Operating Expenses | INR3.1 billion | INR4.0 billion | -2% |
| Commission Ratio | 16.1% | 16.9% | -0.8% |
| Combined Ratio | 86.1% | 94.9% | -8.8% |
| CISR (IFRS) | 97.4% | - | - |
| CISR (FY26) | 101.4% | 103% | -1.6% |
Investor Takeaway
Investors should consider maintaining a buy recommendation for Niva Bupa with a price target of Rs 97.
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