Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PB Fintech Ltd (BOM:543390, Financial) reported a 78% year-on-year growth in new premium for its health and life insurance business for Q1 FY2024-25.
- Total insurance premium for the quarter was INR4,871 crores, with new core insurance premiums growing at 66%.
- Revenue for the quarter grew 52% year-on-year to just over INR1,000 crores, and PAT improved to a profit of INR60 crores.
- Renewal/trail revenue is at an ARR of INR559 crores, up from INR418 crores last year, operating at about 85% margin.
- PB Partners, the agent aggregation platform, continues to lead the market in scale and efficiency, covering over 95% of the country.
Negative Points
- The company overspent by about $3 million this quarter in terms of actual operating capacity.
- Credit-linked revenue was INR130 crores, below expectations and showing a negative growth of about 8% year-on-year.
- The contribution margin has been impacted by the growth in health fresh business, which comes at zero contribution in the first year.
- There was a one-off GST cost of INR25 crores, impacting other expenses.
- The renewal ARR showed a sequential dip this quarter, attributed to the slow growth 12 months ago.
Q & A Highlights
Q: Following up on Paisabazaar or credit, it looks like the industry recovery towards unsecured is slow. Any thoughts on recovery or plans to revisit the business strategy?
A: Naveen Kukreja, Co-Founder & CEO, Paisabazaar.com: We are seeing industry moderation driven by regulatory advisories and process changes. We expect growth to resume in H2 as GDP and retail credit grow. We are also strengthening our secured focus, aiming for secured business to be about half of our overall business, currently at 15%.
Q: Any one-offs in employee expense or ESOP as they appear to have moved on a QoQ basis?
A: Yashish Dahiya, Executive Chairman & CEO: There was a GST cost of INR25 crores, which is a one-off and is reflected in other expenses, not in employee or ESOP costs.
Q: Thoughts on potential shareholder returns given the scaling of new initiatives and cash on the balance sheet?
A: Yashish Dahiya, Executive Chairman & CEO: We will evaluate potential shareholder returns after March '26. Currently, we continue to invest, and the business does not require the amount of capital we have on the books.
Q: Divergence between take rates on insurance business and contribution margin. Can you explain the dip in take rates?
A: Naveen Kukreja, Co-Founder & CEO, Paisabazaar.com: The dip in take rates is due to a mix shift towards savings products like ULIPs, which have lower take rates. Contribution margin is impacted by the growth in health fresh business, which initially comes at zero contribution.
Q: Written off investment in MyLoanCare Ventures. What were the expectations from this business?
A: Yashish Dahiya, Executive Chairman & CEO: MyLoanCare was a tech-based NBFC. We took a 70% stake, which led to the founder leaving. We prefer investments where we hold 22%-35% equity. This was an early learning for us.
Q: Renewal ARR seems to have dipped this quarter. What is driving this reduction?
A: Yashish Dahiya, Executive Chairman & CEO: Renewal rates at every level are better than before. The dip is due to slow growth 12 months ago. We expect strong renewal growth from next quarter onwards.
Q: Progress of the savings business and its impact on market share?
A: Sarbvir Singh, Joint Group CEO: Our market share in savings has doubled due to offline strategy, regional expansion, and selling better products like low-cost ULIPs. The market's positive performance has also helped.
Q: Impact of price hikes in health insurance on customer behavior and renewals?
A: Yashish Dahiya, Executive Chairman & CEO: Price hikes happened 15-20 months ago. Our renewal rates have held up well. We offer modular products with strong no-claim bonuses, which help retain customers despite price hikes.
Q: Update on the reinsurance business?
A: Sarbvir Singh, Joint Group CEO: We have set up a small team to leverage our retail strength and create better propositions for customers. It will take time to figure out the exact approach.
Q: Market share in retail health and headroom for growth?
A: Yashish Dahiya, Executive Chairman & CEO: We are a small part of the industry with significant growth potential. The health insurance industry in India needs to grow 8-10 times to match global standards. We are focused on solving industry issues to drive this growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
