PB Fintech block deal: 29 lakh shares changed hands; stock dives 34% to lowest since May 2024

PB Fintech Ltd extended its losses in Thursday's trade as 29 lakh shares changed hands in block deals during the afternoon trade. Buyers and sellers could not be identified at this point in time. At 3 pm, shares of PB Fintech shares were down 34 per cent, hitting its lowest levels since May 2024 of Rs 1,247.40 apiece on BSE.

The stock has eroded over a third of its value with few hours as analyts felt that IREDA's much-awaited consultation papers on commissions, if implemented, would drag PB Fintech earnings hard. The Policybazaar parent had 1,42,294 individual investors holding up to Rs 2 lakh shares, as of June 30. The 12-month consensus target on the stock stood at Rs 1,973.52, before the steep slide, hinting at 58 per cent potential upside from the prevailing levels.

"We see this as a risk for distributors like PB Fintech and Turtlemint, noting a 10 per cent cut in new business commission rates translate to a 10-12 per cent fall in their earnings. The scope for insurers to compensate distributors through opex is also limited, due to overall EOM caps and the regulator stating that any payments to distributors will be considered as commissions," Jefferies said.

Among brokerages, Bernstein and Macquarie have an 'Outperform' rating on the stock with targets of Rs 2,310 and Rs 1,950, respectively. Nomura has a 'Neutral' rating with a target of Rs 1,590, while Ambit Capital has a 'Buy' rating with a target of Rs 2,305.

Emkay Global said PB Fintech's business model could come under pressure as it faces sharp cuts in health renewal and porting commissions, first-year term life commissions, and Motor OD and TP commissions.

"NBFCs with higher dependency on insurance commissions (LTF, CIFC, MMFS, BAF, etc) will see a material impact on their earnings if the regulations come in the current form. We will revise our estimates for the insurers and NBFCs once we have more clarity," Emkay Global said.

MOFSL said in a note that IRDAI's consultation paper on "Recalibrating Economics of Insurance Distribution" is not merely an Expenses of Management (EOM) or commission-cap exercise, but an attempt to structurally reset the economics of insurance distribution.

IIFL Securities said IRDAI's draft reforms propose hard, all-inclusive commission caps that are a fraction of current payouts: 2 per cent on credit life versus 28 per cent currently, nil on loan-packaged motor TP versus 16 per cent, 5 per cent on OD versus 16 per cent, and 5 per cent on health versus 40 per cent. The draft also proposes an outright ban on compulsory bundling of insurance with loans and volume-linked incentives for staff selling insurance, it said.

Emkay Global said the consultation paper, titled "Recalibrating Economics of Insurance Distribution", sets out a comprehensive framework of reforms covering insurance distribution, its structure, expenses, commissions, market conduct, transparency and the leveraging of digital infrastructure. The paper proposes sharp reductions in EOM and commissions while also addressing mis-selling and dark patterns, it said.