PB Fintech Ltd. led a slide in shares of Indian insurance companies, distributors and lenders on Thursday, after the country’s insurance regulator proposed caps on commissions and tighter management expenses.
PB Fintech plunged by a record 23%, its worst day since its November 2021 debut. Max Financial Services Ltd. slumped as much as 12%, L&T Finance Ltd. slipped by 10% and HDFC Life Insurance Ltd. tumbled as much as 8.5%.
Late Wednesday, the Insurance Regulatory and Development Authority of India, or IRDAI, proposed measures that could slash insurance fee income for banks and digital brokers by as much as 90% in high-margin categories, as per analysts. The proposals aim to enforce long-term industry discipline and rationalise distribution cost.
“This proposal pushes the sector in uncharted waters by almost cutting the oxygen (commission) supply,” Avinash Singh, an analyst at Emkay Global Financial Services Ltd., wrote in a note. However, final regulations are likely be less strict, he said.
The risks are higher for fintech platforms including PB Fintech and Turtlemint Fintech Solutions Ltd. as a the proposed 10% cut in new business commission rates translates to 10-12% fall in their earnings, according to Jefferies Financial Group Inc. Turtlemint shares slumped as much as 20%.
Among large private banks Axis Bank Ltd. and HDFC Bank Ltd. are more exposed than ICICI Bank Ltd. and Kotak Mahindra Bank Ltd., given insurance fee income’s larger contribution to revenue and profit before tax, according to Macquarie Capital Securities India Pvt. Ltd.
