PB Fintech share price: Jefferies cuts target by 25%; upside, downside scenarios

Jefferies on Friday cut its valuation multiple for PB Fintech Ltd, the parent of Policybazaar, by 30 per cent to 18 times estimated FY30 Ebitda, citing uncertainty with respect to take takes. The global investment bank said IRDA's proposed regulations could have a material adverse impact on PB Fintech's near-term earnings should it be implemented. However, it was quick to note that it is a consultation paper which might undergo changes post collection of feedback.  PB Fintech operates India's largest online insurance platform.

"We have kept earnings unchanged, but cut Policybazaar's valuation multiple by 30 per cent to 18 timers FY30 Ebitda due to uncertainty w.r.t. take rates. Price targets falls to Rs 1,540," Jefferies said.

PB Fintech said in its analyst call that commission cuts may result in non-life NPV falling to 33-40 per cent of the original NPV, while life NPV may remain broadly similar.

"PB indicated non-life NPV could fall to 33-40 per cent of original NPV, should IRDA's proposed commission cuts in health and motor insurance be implemented. The co expects NPV in life insurance to be similar to present levels considering higher renewal commissions in term. We est. a 10 per cent cut in new business commission rates translate to a 10-12 per cent fall in earnings," Jefferies said.

Jefferies said there were questions on whether the new regulations will be applicable on a prospective or retrospective basis. While PB is seeking clarity from IRDA on this, it does not expect insurers to renege existing contracts.

"We note insurers had passed on the loss of ITC to distributors even on existing contracts. Niva indicated on a later call that the new commission regulations will apply retrospectively," Jefferies said.

PB Fintech looking at slowing hiring and marketing to mitigate the impact. The focus is on preserving cash and new opportunities such as MGA.

Jefferies said the new Insurance Act enlists MGA as an intermediary. PB is already providing insurers with fresh growth and limiting loss ratios in health insurance,
similar to MGAs.

"However, MGAs do bear u/w risks. (2) New products: Credit life could be a new product opportunity; (3) Setting up own insurers: PB indicated the probability of setting up an insurer has increased; (4) Monetize services: PB could look at monetizing services such as PB Wheels, PB Garages, etc," Jefferies said.

Base scenario PB Fintech target price: Rs 1,540

In its base case, Jefferies sees a revenue CAGR of 31 per cent over FY26-29. It sees contribution CAGR of 38 per cent, with margins increasing by 4.5 percentage points. Adjusted Ebitda in the base case is seen expanding 4 times over FY26-29e, with margins rising 9 percentage points. J

Upside scenario  PB Fintech target price: Rs 1,620 
In its upside scenario, it expects revenue to grow 33 per cent over FY26-29 annually. Contribution CAGR is seen at 40 per cent, with margins expansion projected at 4.5 percentage points. Adjusted Ebitda in this scenario is seen expanding 4 times over FY26-29e, with margins rising 9 percentage points based on 30 times September 2028 EV/adjusted Ebitda.

Downside scenario PB Fintech target: Rs 1,030
In its downside scenario, it expects revenue to grow 29 per cent over FY26-29 annually. Contribution CAGR is seen at 34 per cent, with margins increasing 3 percentage points.

"Adjusted Ebitda expands 3 times over FY26-29e, with margins rising by 7 percentage points. PT of Rs1,030 based on 26 times Sep-28e EV/adjusted Ebitda," Jefferies said.