PB Fintech shares crash 32%: Why Policybazaar parent fell like deck of cards; 1.42 lakh retail investors hit; targets

PB Fintech Ltd, the parent company of Policybazaar, extended its Thursday fall to 32 per cent, unsettling its 1.42 lakh retail investors. The sharp selloff comes following IREDA's much-awaited consultation papers on commissions, which if implemented could drag PB Fintech earnings hard, analysts warned.

"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.

Shares of PB Fintech fell 32 per cent to hit a low of Rs 1,282.30 apiece. The Policybazaar parent had 1,42,294 individual investors holding up to Rs 2 lakh shares, as of June 30, shareholding data showed.

Emkay Global said PB Fintech's business model will come under question as it faces a sharp cut 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," said Emkay Global

Among brokerages, Bernstein and Macquarie have 'Outperform' rating on the stock with targets of Rs 2.310 and Rs 1,950, respectively. Nomura suggested 'Neutral' and a target of Rs 1,590. Ambit Capital has 'Buy' and a target of Rs 2,305.

MOFSL in a note said IRDAI’s consultation paper on “Recalibrating Economics of Insurance Distribution” is not merely an Expenses of Management (EOM)/commission-cap exercise but is instead 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: "From proposing sharp reduction in EOM and commissions to addressing the issue of mis-selling and dark patterns, the consultation paper on “Recalibrating Economics of Insurance Distribution”, sets out a comprehensive framework of reforms covering the insurance distribution, its structure, expenses, commissions, market conduct, transparency, and leveraging digital infrastructure."