Shares of PB Fintech Ltd have fallen more than 7% over the past two trading sessions, as the Insurance Amendment Bill 2025 emerges as a potential headwind. The stock had only just begun to recover from recent goods and services tax (GST) changes.
Before delving into the insurance bill, it’s worth understanding the GST impact. PB Fintech’s online insurance broking business, policybazaar.com, earns commissions from insurance companies. Since 22 September, collection of insurance premiums has been exempt from GST, meaning the GST paid on commissions is no longer available as input tax credit. This has increased costs for insurers, some of whom may offset the impact by reducing the commission paid to brokers.
The exact extent of commission reductions due to GST changes, if any, will likely be reflected in Q3FY26 results, or at the latest, in Q4FY26.
Amid this, the insurance bill implementation might pose a fresh challenge. The bill is set to empower the Insurance Regulatory and Development Authority of India (Irdai) to cap the commission expense of insurance companies.
Here, a more relevant concern is about front loading of commissions that needs to be addressed by Irdai. Front loading is the practice of paying higher commission to the agent in the first year of getting a new customer, which tapers off in subsequent years. There is a need to even out the commission paid over the term of the policy to incentivize agents to ensure that the customer persists with the policy throughout the term.
Any such move could hit policybazaar.com, PB Fintech’s key cash cow that funds other loss-making ventures.
Policybazaar.com contributed nearly 89% of Q2FY26’s core online business revenue at ₹852 crore with the remaining coming from paisabazaar.com. Policybazaar.com’s revenue grew by 37% year-on-year, while paisabazaar.com’s declined by 22%. The take rate for policybazaar.com or percentage commission earned from blended premium (fresh plus renewal) was largely unchanged year-on-year at 16% in Q2FY26.
If policybazaar.com grows its FY26 premium collection by 35%, based on H1 growth rate, to ₹22,000 crore, but the average commission rate of 16% declines 100 basis points, the impact on revenue could be ₹220 crore. This entire revenue loss flows through to Ebitda as there is no corresponding drop in costs. Hence, the FY27 Bloomberg consensus revenue estimate of ₹1,187 crore is at risk of being lowered.
Investors will start discounting the worries over the long-term effect of Irdai’s commission capping move. But, if commission rates are indeed slashed by Irdai, then insurance companies are unlikely to be allowed to retain the benefit. It will be passed on to customers in the form of lower insurance premium, which should boost PB Fintech’s commission revenue through higher premium collection.
Overall, the earning picture remains fluid as there could be a double whammy if insurance companies choose to reduce commission rate owing to the GST changes and a regulatory push from Irdai. This is all the more reason for investors to turn cautious about already elevated valuation. PB Fintech is quoting at a PEG (price/earnings to growth) ratio of 1.6x based on Motilal Oswal Financial Services’ FY27 estimates, which is higher than fintech company One 97 Communications Ltd’s (Paytm) 1.3x valuation.
