Policybazaar’s agent business may need to change under Irdai’s draft rules, says CEO Yashish Dahiya
PB Fintech Ltd, the parent of Policybazaar, said its point-of-sale person (PoSP) insurance distribution business may need to be restructured if the insurance regulator’s proposed rules are adopted in their current form. However, it will wait for the final regulations before deciding its next steps.
The Insurance Regulatory and Development Authority's (Irdai) proposals say open-architecture distributors will be paid less than closed-architecture ones, and “that, in my opinion, does not leave scope for PoSP the way it is today”, chairman and chief executive Yashish Dahiya said on a post-earnings call with analysts on Friday.
He said the business could carry on if it evolved into something different, “like maybe a services player”, and stressed that “these are not the final regulations. So let us wait and watch”.
PB Partners, the fintech group's PoSP platform, earned ₹698 crore in the September quarter, up 39% from a year ago, out of consolidated operating revenue of ₹2,178 crore. It has 131,000 active partners, and tier-II and tier-III towns contributed 76% of its premium. Dahiya said the company already makes a loss on the business and asked for time to transition, since PB Fintech pays its PoSPs before insurers pay it.
Dahiya did not rule out a return to losses. Asked whether the company could go back to burning cash, he said “to be brutally honest, we need to wait a little bit for the final regulations to come out”, though he added that the company did not intend to burn cash. Under the current draft, he said, the profitability of renewals from insurance distribution is “extremely limited”. PB Fintech’s renewal and trail revenue stood at ₹1,097 crore over the 12 months to September.
PB Fintech’s shares fell 36% on 24 September, a day after Irdai released the consultation paper.
The company is in informal conversations with Irdai about what it called other options, which it will announce only after it gets regulatory approval. Dahiya ruled out taking minority stakes in insurers but would not say more. “There is clear precedent and laws out there,” he said, adding that “the intent is quite clear in our mind”.
The management also said that the Irdai paper’s mention of non-insurance services being allowed could open new revenue, including possibly charging for the claims support Policybazaar now offers free, depending on “whatever the regulation permits”. More than 1,000 responses on the paper have already reached the regulator, Dahiya said.
The company has already started cutting costs, with hiring in October at “a very, very small fraction” of earlier levels, the management said. Existing executives will be moved to run newer businesses rather than hiring from outside. Dahiya said that if a customer's value halved under the new payouts, the company would cut its marginal spending by the same proportion, and called artificial intelligence “a very big lever” for efficiency.
Those savings will have to offset rising marketing costs. Advertising and promotion expenses rose 59% from a year ago to ₹447 crore in the quarter, well ahead of revenue growth, as the management said demand had been “very tough” compared with last year’s surge after retail health premiums were exempted from goods and services tax (GST).
Paisabazaar, the group’s credit marketplace, will not become the centre of the business. Policybazaar is “not a money supermarket, it’s an insurance supermarket”, the management said, adding that the group does not want to become a lending platform. If the final rules allow non-insurance products, Paisabazaar’s loans, bonds, fixed deposits and mutual funds could be sold to Policybazaar customers.
Core credit disbursals rose 22% to ₹2,791 crore but were broadly flat from the June quarter, which the management attributed to adding lending partners before chasing growth. “Paisa will contribute, but I don’t think anybody needs to assume that it is more important for Paisa to contribute than it was before,” Dahiya said.
PB Fintech’s consolidated net profit rose 43% from a year ago to ₹192 crore in the September quarter.
The stock closed at ₹1,000 on Friday, down ₹17.90, or 1.76%, ahead of the results announcement, while the Sensex gained 0.42%.
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