PB Fintech Q3 FY 2024 (concall – rough cut)
Filing: https://www.bseindia.com/xml-data/corpfiling/AttachLive/6f489e31-0009-41a8-8070-2fc00507206d.pdf
- Turned PAT positive. Adjusted EBITDA will keep improving by 200 crores annually
- ESOP cost in Q3 FY 2024 was 65 crores (mentioned in call but it shows 37 crores in filing). ESOP cost is likely to be in 100 to 120 crores range in medium to long-term. Current year is likely to be 330 crores.
- This is a big takeaway: Of the 501 crore additional revenues 9M YoY, 170 crores flown to EBITDA directly.
- Another big takeaway: Analyst asked – Contribution margin in core business is stable at 44%? Is this plateauing? Answer: it will not plateau even 10-years from here. Industry is 7 to 8 lakh crore premium and only 1 lakh is new premium rest is renewal premium. Renewal premium is much more profitable. So contribution margins will continue to improve as company increases share of renewals.
- Health grew higher than Term. Health growth depresses EBITDA margins, in absence of higher growth in health EBITDA margins might have been higher by 2%. Health is 0% contribution margin in first year.
- Health revenue in first year is 20% but underwriting cost is about 80% upfront taken so it depresses margins but very good for long-term.
- I did not understand this fully – Health insurance first year NPV is 2.7x, Motor other – 1.6x and life is 1.2x.
- Credit to slow down due to unsecured lending tightening by lenders (in line with Paytm). Management guides 2-3x of industry loan growth, industry growth is likely to be in 13-16% growth (can’t remember this exactly but broadly in similar lines). However, Yashish Dahiya mentioned I will be disappointed if we grow lower than 40%. In H1 company grew in 40-50% range. H2 may come down to 30-40%. Long-term growth remains intact.
- Credit business is at 8% EBITDA margin while insurance is 14%
- New initiatives (PBpartners and UAE business): broken even in Dec-2023. PBPartners present in 90% of India pincodes
- PBpartners: margins improved significantly due to focus on retail (small) agents business. Retail agents increased by 56%
- Bima Sugam and ONDC risk: welcome competition for overall improvement of insurance coverage of the country.
- On commission on trail basis (on new I-Pru product? – We are selling such product and welcome products which are beneficial and tied to persistency of the insurance.
- Question on TPA (in relation to Bajaj Finserv’s acquisition of TPA): We have 40% stake in visit health (TPA) they are doing wonderful job.
- Management shall come back on: capital allocation, payment aggregator service and strong focus on credit side given opportunity.
- Whats working for health insurance? Ticket size not changed so volume driven. Each of the thing worked – top of the funnel, better customer experience, virtuous cycle working. Karma coming back
quip by Yashish Dahiya. We celebrate claims now instead of new volume. Huge focus on disclosures. Onground teams also helped, explaining better, in-person support. 30 minutes claim support and word of mouth worked. Tech and data to catch fraud. - POSP – If agent leaves? Its agent’s business. PB gets only fee for usage of tech.
Diclousre: Own the stock. transacted in last 30 days.
Disclaimer: I am not a financial advisor and nor a SEBI registered Analyst. The content shared here is only for learning purpose. All the names mentioned here are for example purpose. I may buy more, exit or partly sell the stock/bonds without any prior intimation.
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