Shares of PB Fintech, the parent company of Policybazaar and Paisabazaar, have been under intense selling pressure, extending their losing streak to six consecutive sessions and falling around 48% during the period. The sharp decline has come as investors reassess the potential impact of proposed changes to insurance commissions and distribution economics.
The stock hit its 52-week low of ₹965 on October 1. It has now tanked over 50% from its 52-week high of ₹1,963.00, hit in December last year. The scrip has shed 42% in 3 months, 31% in 6 months and 41% in the last 1 year.
The sell-off has raised concerns over the earnings outlook for insurance intermediaries, particularly companies that rely on commissions and distribution fees. Several brokerages have since revised their estimates or valuation assumptions for PB Fintech, with concerns centred on the extent to which the proposed regulatory changes could affect its general insurance and point-of-sales person (POSP) businesses.
Why is PB Fintech stock falling? IRDAI rules explained
The pressure on PB Fintech shares intensified after the Insurance Regulatory and Development Authority of India (IRDAI) proposed sweeping changes to insurance distribution rules. The draft reforms are aimed at reducing insurance costs, improving transparency and expanding coverage, while also bringing greater discipline to the distribution ecosystem.
The proposals include changes to Expenses of Management (EoM), segmental commission limits and restrictions on practices described as “dark patterns”. Under the proposed framework, insurers would need to provide customers with product and pricing information without requiring them to submit personal details upfront.
IRDAI has also proposed greater disclosure of commission rates in policy documents and changes covering motor insurance. The proposed commission reductions across health, motor and term insurance have raised concerns about the economics of insurance intermediaries.
For PB Fintech, the key concern is that lower commission or take-rates could reduce the profitability of its general insurance business. The proposed changes could also affect its POSP model, which connects insurance customers with distributors.
Bernstein cuts PB Fintech target by 53%
International brokerage Bernstein has sharply reduced its target price for PB Fintech to ₹1,085 from ₹2,310, a 53% cut, while retaining its Outperform rating. The revised target implies around 11% upside from the stock’s ₹980 closing price on October 1.
Bernstein said its revised earnings forecasts and target reflect a harsher-than-expected impact from the proposed commission cuts. While it continues to see strong growth and margin expansion potential beyond FY28, the brokerage believes the company faces a critical 18-month period as it adapts its business model.
“Mitigation strategies exist, but they are hard to quantify/bake-in at this point (we expect some value to be recouped – not in our forecasts). The POSP business will scale down. We continue to like what is left of the business from a growth/value creation perspective (beyond FY28), but the next 18-months will be ‘do-or-die’ with a wide range of outcomes possible,” Bernstein said.
The brokerage expects reduced take-rates in general insurance to be insufficient to cover current costs. It believes PB Fintech could either scale back its general insurance operations or develop alternative models to capture value lost from lower health insurance revenues.
Moreover, Bernstein has cut its FY30 net income estimate to ₹2,000 crore from ₹3,200 crore earlier and reduced its FY28 EPS estimate to ₹24.44 from ₹35.49. Its estimates assume that the proposed commission caps are implemented without a regulatory rollback.
The brokerage has also assumed sharp cost controls in the core business from FY28 and values PB Fintech at around 25 times FY30 earnings. It said potential benefits from mitigation strategies have not been included in its forecasts because their impact remains difficult to quantify.
“We assume max pain, with no rollbacks from the regulator and do not bake in upside from potential mitigation strategies. We see an arduous path to our revised FY30 net income forecasts ( ₹2,000 crore vs ₹3,200 crore before regulatory hit),” Bernstein said.
Other brokerages also flag risks
Jefferies has also reduced its target price for PB Fintech to ₹1,540 from ₹2,050, while retaining its Buy rating. The brokerage said PB Fintech indicated that non-life NPV could decline to 33-40% of the original level if the proposed commission cuts in health and motor insurance are implemented.
However, Jefferies expects life insurance NPV to remain broadly similar to current levels, supported by higher renewal commissions in term insurance. It estimates that a 10% reduction in new-business commission rates could result in a 10-12% decline in earnings.
Jefferies has retained its earnings estimates but cut PB Fintech’s valuation multiple by 30% to 18 times FY30E EBITDA, citing uncertainty around take-rates. It also expects the company could slow hiring and reduce marketing expenditure in the near term.
Morgan Stanley has estimated that PB Fintech’s health business NPV could decline 60-70% under the proposed framework, while life insurance NPV is expected to remain broadly stable. The brokerage also highlighted risks to PB Partners’ POSP business.
Morgan Stanley said PB Fintech is evaluating manufacturing, reinsurance broking and new products, while also seeking MGA regulation that could potentially create new opportunities for distributors. It also expects the company to focus on reducing losses at Paisabazaar and its UAE operations as it navigates the regulatory changes.
Last month, brokerage HSBC also downgraded the stock to ‘Hold’ and cut its target price to ₹1,150 from ₹2,100, while Motilal Oswal retained a ‘Neutral’ rating with a target of ₹1,150.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
