ICICI Prudential Q3 Review: Brokerages Flag Margin Resilience Despite GST, Persistency Woes
Jefferies highlights the resilience in margins despite the loss of GST input tax credit.
ICICI Prudential Life delivered a strong December quarter, led by resilient margins that offset soft premium growth. While the absence of GST input tax credit weighed on margins, this impact was neutralised by a better product mix, favourable yield curve movements, higher protection and rider attachments, longer policy tenures, and cost controls.
Jefferies maintained its 'buy' call, and raised its target price to 820 (from Rs 800. Citi is also constructive, highlighting stable margins, gradual normalisation in APE growth, and revival across channels. Citi rolls over to Dec-27E and maintains a target price of Rs 900 on the counter.
Jefferies highlights the resilience in margins despite the loss of GST input tax credit. In Q3, VNB margin expanded 320 bps YoY and was flat QoQ at 24.4%. Margin strength was supported by product mix improvements, higher protection share, yield curve benefits, and cost discipline. Management is also renegotiating commission structures, which could further support margins over time.
ICICI Prudential Q3 Highlights (Consolidated, YoY)
Net profit up 19% at Rs 387 crore versus Rs 325 crore
Net premium income down 3.7% at Rs 11,809 crore
61st month persistency ratio at 58.6% versus 62.6%
13th month persistency ratio at 81% versus 85.6%
Solvency ratio at 214.8% versus 213.2% (QoQ)
61st month persistency ratio at 58.6% versus 59.5% (QoQ)
13th month persistency ratio at 81% versus 81.4% (QoQ)
Persistency trends remain weak, particularly the 13-month ratio, which declined 540 bps YoY due to challenges in certain products and channels. Management actions are underway, but if persistency remains weak, it could lead to negative variances in EV or EPS adjustments, though Citi believes the impact is likely to be limited.
Jefferies has raised VNB estimates for FY26-28E by 3-4%, factoring in slightly higher APE growth and stronger margins. It expects 16% CAGR in VNB over FY26–28E. Despite this, IPRU continues to trade at a 15–25% discount to peers, largely due to lower ROEV and earnings volatility. Consistent growth could drive a re-rating, says the brokerage.
Both Jefferies and Citi see the December quarter as a margin-led positive surprise, with improving growth momentum and a favourable product mix underpinning medium-term prospects. Persistency remains the key risk, but steady execution and margin stability could support gradual re-rating of the stock.
