SPARK INSTITUTIONAL EQUITIES PRIVATE LIMITED

Spark Institutional Equities Pvt. Ltd. is a SEBI registered Research Analyst bearing SEBI Registration No. INH200009722

INSURANCE
Initiating Coverage | 26 September 2023

PB FINTECH
‘Renew’ed path to profitability

RESEARCH ANALYTS

Sanketh Godha
 sanketh.g@avendusspark.com
 +91 22 6176 6821
Sai Adithya Menon
 saiadithya.m@avendusspark.com
 +91 44 4344 0081

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PB FINTECH CMP Target Price

Rs. 700
Rating
Rs. 742 REDUCE
‘Renew’ed path to profitability

PB Fintech is on its path of reporting profitability going ahead. This is largely driven by the increase in the share of renewal premium in core insurance. INITIATING COVERAGE
However, the softening of growth in core insurance’s new premium in the last 2 years remains an area of concern. Even the offline model in the core 26 September 2023
insurance has not significantly aided in improving the new business growth. We expect moderation in new premium to continue, which shall have a
Industry Insurance
cascading effect on growth of renewals. While the new initiatives bolsters the top line, its contribution to profitability is expected to be limited.
Key Stock Data
Despite being on a trajectory towards profitability, at CMP, PB Fintech's management guidance of achieving Rs. 10bn PAT in FY27E translates into a
Bloomberg POLICYBZ IN
valuation of ~45x FY27E core PAT (excluding other income), which we consider to be steep. Also, our estimate for FY27E PAT is ~9% lower than the
management guidance, which is based on a revenue CAGR of 26% from FY23-27E and an adjusted EBITDA margin expansion to 13% by FY27E, up from Shares o/s 450mn
-5% in FY23. Hence, we do not anticipate an upside at CMP and initiate PB Fintech with a REDUCE rating and TP of Rs 700 (based on DCF).
Market Cap Rs. 334bn
Despite smaller addressable premium pool, revenue potential for Policy Bazaar remains substantial: In life insurance we believe, Policy Bazaar exposure
in term of insurers is largely limited to Pvt Life insurers (excluding SBILIFE) and in term of products to Ind. protection, ULIPs and non-par savings. Hence, 52-wk High-Low Rs. 818-356
the premium addressable market for Policy Bazaar in life insurance sector is ~13% of new business premiums and ~20% of total premiums (including 3m Avg. Daily Vol Rs. 1,098mn
renewals) of the industry. However, the corresponding revenue pool available to distributors (commissions/business promotion spends by life insurers)
Index NIFTY
exceeds 40%. Similarly, in general insurance, Policy Bazaar's exposure is confined to ~28% of GDPI, which includes renewal motor, retail health/travel
insurance. However, the corresponding revenue pool for distributors is at ~45%. The addressable revenue pool in this sector is substantial (~Rs. 600bn in F&O NO
FY23) and witnessed a healthy CAGR of 19% over FY19-23. As per our estimates, Policy Bazaar holds ~5% market share in addressable distributor's Latest Shareholding (%)
revenue pool. An ~100bps market share expansion in revenue pool in FY23-27E shall lead to a 22% revenue CAGR for Policy Bazaar.
Promoters 0
Ad and branding costs, and assisted sales model for focus products to impact new business profitability; renewals to drive overall profitability:
Globally, aggregators have tasted success with standard and compulsory products like motor and home insurance, which are often bought without Institutions 65
assistance. However, in India, the leading aggregator, Policy Bazaar, has centered its business on health and term insurance, which are relatively complex Public 35
and not mandatory purchases. Hence, they rely on assisted sales to convert customers. The heavy branding costs and associated assisted sales expenses
has kept the profitability of new business lower. In India, renewal commissions are protected for distributors (especially in life/health). As a result, a
sizeable portion of profitability is driven by renewal business. The core marketplace business has seen an increase in the share of renewal premium (from Stock Performance (%)
~26% in FY19 to ~52% of total premium in FY23). This expansion has led to a growth in contribution margin (from 9% in FY19 to 43% in FY23) and adjusted 1m 3m 12m
EBITDA margin turning positive (6% in FY23 and 13% in 1QFY24, compared to -58% in FY19). POLICYBZ -1% 6% 55%
Health Insurance key to profitability, (especially renewals); decline in online traction in health insurance would impact profitability: Policy Bazaar's Sensex 2% 5% 16%
profitability heavily relies on renewals, especially in health insurance. In the life insurance segment, Policy Bazaar majorly sells online protection and RESEARCH ANALYSTS
savings plans, which yield higher revenue in the first year but offer very low renewal income compared to traditional channels. Similarly, in motor
insurance, due to factors like non-stickiness and limited trail income (caused by long-term plans and strong dealer control in initial years), the renewal SANKETH GODHA
revenue is lower. However, in the case of health, several factors contribute to a better renewal revenue pool: 1) Higher renewal commissions vs. life sanketh.g@avendusspark.com
insurance, 2) sticky renewal rate, 3) Regular price increases and 4) Long trail. The renewal revenue pool is significantly better than the other products. +91 22 6176 6821
With limited associated costs for renewals (contribution margin of ~85%), the future profitability is likely to be driven by health insurance. Further, the SAI ADITHYA MENON
LTV/CAC ratio for health insurance, which Policy Bazaar claims to be ~2.8 times, is superior to other products. However, since health insurance is a saiadithya.m@avendusspark.com
complex product, if the industry witnesses limited traction in the online channel, it could impact Policy Bazaar's profitability. Currently, web aggregators, +91 44 4344 0081
the company's online channel, and brokers (PB is now classified as a broker) collectively contribute ~12% to the retail health insurance business.
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 PB FINTECH CMP Target Price
Rs. 700
Rating
Rs. 742 REDUCE
‘Renew’ed path to profitability
Long-term success of D2C + Offline initiative in core business and claim servicing to drive health business: Policy Bazaar’s ability to gain market share in retail health and life savings
depends on its sustainable success of D2C+ Offline initiative and claim servicing (114 cities). With better conversion rate and ability to sell higher ticket size, the initial signs of offline
initiative (77 branches, 57 cities, 1000 employees) in core insurance are encouraging, as it is now contributing ~20% of new business. Also, the new business premium per enquiry has
seen a healthy growth in FY23 (though moderated in 1QFY24). However, we believe the costs related to offline sales and claim servicing can lead to lower contribution margins.
Industry’s new business growth in health is softening, revival in protection business in near-term positive: As per our estimates, after strong traction in FY21 (due to COVID), the new
business premium growth for the retail health significantly softened in FY21-23 (assuming renewal rate of 85%). Despite factoring market share gain for Policy Bazaar in new retail health,
the sustained slowdown in this segment is concerning. However, in FY24E, weakness in retail health shall be negated by the strong revival in Ind. Protection on a low base (after 3 years of
weakness). We don’t expect the protection business to show strong traction after FY24E, due to regular revision in reinsurance rates & limited number of reinsurance suppliers.
Moderation of new business in core business shall lead to lower premium CAGR of 27% in FY23-27E vs. FY20-23: The new business growth for Policy Bazaar in FY20-23 moderated to
15%. A large part of the 30% CAGR in FY20-23 in core business premium growth was driven by renewal premiums. With softening of new retail health growth and subsequent lower feed
to renewals, we expect premium CAGR of 27% in FY23-27E. However, Ind protection shall aid new business in FY24E.
Long-term profitability of new initiatives to be lower than core insurance business; expect to affect profitability in near-term: We believe, new initiatives in insurance ̶ POSP,
Corporate and Dubai ̶ shall not be significantly profitable in the long-term. The largest among the three, POSP business, currently is burning cash with a negative contribution margin. Even
if Policy Bazaar were to rationalise payouts, we anticipate that the contribution margin of POSP would still be much lower than the core business. While these initiatives are likely to boost
top-line growth, we see them making only a limited contribution to profitability. The moderation in the POSP in 1QFY24 has led to improved contribution and adjusted EBIDTA margin.
Paisa Bazaar - Expect profitability to improve with scale but shall remain lower than Policy Bazaar: Following the impact of COVID, Paisa Bazaar experienced a notable resurgence in
disbursements and credit card activity. As it continues to scale up (leveraging digital penetration for unsecured loans), focus on co-created products, and work towards increasing trail
income (up from 7% in FY23 to 14% in 1QFY24), we expect improvement in Paisa Bazaar's profitability. Unlike insurance sector, Paisa Bazaar exhibits lower customer stickiness (with trails
less than 3 years), hence we expect it to have lower profitability vs. Insurance.
PAT to be lower vs. management guidance in FY27E: The fall in ESOP costs, higher contribution from renewal in core insurance, reduction in exposure to POSP, and improved scaling in
Paisa Bazaar, shall lead to profitability for PB Fintech over FY24-27E. We expect PB Fintech to achieve a PAT of Rs 9.1bn in FY27E, vs. the management's guidance of Rs. 10bn (incl. other
income of Rs 3.5bn). This shall result in a contribution margin of ~ 35% (24% in FY23), adj. EBITDA margin of 13% (-5% in FY23) & reported EBITDA of 10% (-26% in FY23) by FY27E.
Concentration risk posed by a few insurers in Life and health is a concern: Though Life and health insurance are key to PB’s success, the concentration risk in both SAHIs (~60% of
revenue from 2 insurers) and life insurers (~55% of revenue from 2 insurers) remains a cause of concern.
IRDAI initiative - Bima Sugam - if embraced by industry as preferred online platform in long-term, could pose risk to Policy Bazaar: Bima Sugam is an IRDAI initiative to establish a
'Neutral' online marketplace, promoted by insurers, that serves as a one-stop destination for all insurance-related needs. It offers services such as purchasing insurance policies,
facilitating policy portability, changing insurance agents, and settling claims. Although its launch has faced multiple delays (now rescheduled to June 2024), if it proves to be successful, it
could present a substantial challenge to online platforms like Policy Bazaar.
Financial Summary
Year Revenue (Rs mn) EBIDTA EPS (Rs) P/E (x) EV / EBIDTA (x) EV / Sales(x) ROE (%)
FY23 28,168 -6,616 -10.0 -74.2 -46.9 12.1 -9.0%
FY24E 34,590 -1,825 0.2 3,119.1 -170.6 9.9 0.2%
FY25E 43,724 1,260 6.1 121.3 246.4 7.6 5.3%
FY26E 54,998 4,330 12.4 59.8 71.2 5.9 9.9%
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PB FINTECH

5 PB Fintech – Opportunity Size

12 PB Fintech

18 Policybazaar

26 Paisabazaar

29 Profitability

35 Valuation & Financials

46 Global Peers

49 Glossary

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PB Fintech – Opportunity Size

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 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Life insurance: Addressable market for Policy Bazaar is much bigger in terms of commissions vs. premiums
Popular life insurance products sold online are Ind Protection, ULIPs and Non-Par Savings. Further, Pvt insurers are more Distributors’ revenue pool (commission + business promotion
active in selling products online. Within Pvt, SBILIFE’s presence in third-party online distribution is limited. Considering spends) is much bigger in prominent online products
these exclusions, we believe, the addressable market for Policy Bazaar in Life Insurance (esp. new business) is ~12-13%.
FY23 - Life Insurance (New business) - Revenue pool to
Life - New business Premium (FY23) 500 distributors (Rs bn) 100%
100.0%
4,000 100% 400 100%
75%
300
50%
3,000 75% 200 61%
55%
39.0% 100 25%
2,000 50% 389 239 213
0 0%
23.2%
17.3% Industry Pvt Pvt (Ex- SBILIFE)
11.9%
1,000 25% New Business Commission + Business Promotion(Rs bn) % of Industry
0.9%
3,705 1,445 859 642 439 32 FY23- Life Insurance (Total) - Revenue pool to distributors (Rs
0 0% bn)
Industry - Individual + Industry - Individual Industry - Pvt Pvt (Ex-SBILIFE) Pvt (Ex-SBILIFE) - Pvt (Ex SBILIFE) - 600 100%
Group Protection + Non Par Protection 100%
75%
Savings + ULIPs 400
FY23 - New business (Rs bn) % of total
50%
200 50%
44% 25%
100% Life - Total Premium incl. Renewals 551 275 241
10,000 100% 0 0%
Industry Pvt Pvt (Ex- SBILIFE)
71%
7,500 75% Total Commission + Business Promotion (Rs bn) % of Industry

5,000 50% New Business & Total - Take Rate (%)

32% 40%
25% 33%
19% 27% 28%
2,500 25% 30%
7,808 5,548 2,534 1,940 1,455 20% 12%
10% 10% 11%
0 0% 7%
10%
Industry - Individual + Industry - Individual Industry - Pvt Pvt (Ex-SBILIFE) Pvt (Ex-SBILIFE) -
Group Protection + Non Par 0%
Savings + ULIPs Industry Industry - Pvt Pvt (Ex- SBILIFE)
Individual
FY23 - Total (Rs bn) % of total Total Premium - Take Rate (%) New Premium - Take Rate (%)

Source: Company Data, IRDAI, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 6
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

General Insurance has larger premium and distributor revenue pool vs. Life insurance for online products

Popular general insurance products sold online are Motor (esp. Renewals), Retail Health (New & eligible for renewal commissions) and Travel. With strong trail commissions, retail health is
Excluding ICICIGI (not present in price comparison platform), the addressable market for Policy Bazaar is ~30% of GI premium. Given most profitable product for online distributors
distribution revenue pools are strong for these products, the addressable market in revenue terms is much higher
FY23 - Addressable Market Mix (%)
100% FY23 - General Insurance - GDPI (Rs bn)
2,800 100%
Travel,
2,400 Retail 1%
80%
2,000 Health,
60% 44%
1,600 46% 42% 39%
1,200 31% 28% 40%
800
20%
400
2,569 1,177 1,079 998 788 725
0 0%
GDPI GDPI - Motor + Retail GDPI - Motor + Retail GDPI - Motor + Retail GDPI - Renewal Motor + GDPI - Renewal Motor +
Health + Travel Health + Travel (ex- Health + Travel (ex- Retail Health + Travel (Ex- Retail Health + Travel (ex- Renewal
ICICIGI) ICICIGI & HDFC) ICICIGI) ICICIGI & HDFC) Motor,
55%
GDPI (Rs bn) % of total

General Insurance - Revenue pool to distributors (Rs bn) General Insurance - Take Rate (%)
400 125% 24%
100% 25%
79% 100%
300
69% 20%
62% 75%
200 51% 45%
50% 15% 14%
100
25%
350 277 241 216 179 158 10%
0 0%
Industry Motor + Retail Health + Motor + Retail Health + Motor + Retail Health + Renewal Motor + Retail Renewal Motor + Retail 5%
Travel Travel (Ex - ICICIGI) Travel (Ex - ICICIGI & Health + Travel (Ex - Health + Travel (Ex -
HDFC) ICICIGI) ICICIGI & HDFC) 0%
Industry Motor + Retail Health +
Commission + Business Promotions (Rs bn) % of total Travel

Source: Company Data, IRDAI, Avendus Spark

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 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Life insurance: Poor growth in protection (in FY21-23) impacted online, web aggregator and broker channel, where Policy Bazaar has a presence

Pvt insurers largely drive growth in the channels where Policy Bazaar is present; pickup in ULIPs and non-par savings in this channel led to better growth in FY23

Ind Life NBP: On-line channel + Web Aggregator + Brokers (Rs bn) On-line + Web Aggregator + Brokers - Pvt vs. LIC Mix (%)
70 60%
59 100% 1.2% 1.5% 0.7% 2.7% 2.3%
60 52% 50% 7.5%
13.1%
50 90%
44 40%
38
40 35 80%
22% 27 30%
30 35% 98.8% 98.5% 99.3% 97.3% 97.7%
16% 30% 70% 92.5%
20% 86.9%
20
10 17 10% 60%
14 13%
11%
0 0% 50%
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Online + Web Aggregator + Brokers - Ind NBP (Rs bn) YoY (%, RHS) Pvt LIC

Source: IRDAI, Company, Avendus Spark

Revival in protection business is near-term positive in FY24E; this shall lead to higher contribution of online / web aggregator/broker channel in NBP
Life Ind NBP - Online+ Web Aggregator + Broker % of total Ind NBP Life Ind NBP - Online+ Web Aggregator + Broker Mix (%)
8% 6.7%
6.4% 100%
5.8% 6.0%
5.7%
6% 80%
4.4% 52% 53% 49% 57%
4.3% 4.1% 67% 67% 75%
3.4% 3.4% 3.5% 60%
4% 2.7%
6% 8% 12%
1.8% 1.9% 40% 6%
2% 3% 4%
20% 42% 1%
39% 40% 38%
29% 29% 24%
0% 0%
FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY17 FY18 FY19 FY20 FY21 FY22 FY23
Online+Web Aggregator + Brokers - % of Ind NBP(incl LIC)
Online+Web Aggregator + Brokers - % of Ind NBP (Pvt) On-line Web Aggregator Broker

Source: IRDAI, Company Data, Avendus Spark

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 PB FINTECH | Rating: REDUCE | TP: Rs. 700

General insurance: Unlike life insurance, there is strong growth in channels related to Policy Bazaar in retail health

Strong growth in new retail health during FY21 (COVID led demand) and subsequent renewals are leading to strong contribution of online, web aggregator and brokers in health business

Retail Health GDPI : On-line channel + Web Aggregator + Brokers (Rs bn) Online + Web Aggregator + Brokers % of Retail health GDPI (%)
40 70%
59% 13.0% 12.1%
60% 12.0%
36 10.9%
30 50% 11.0%
38% 28
31% 40% 10.0% 8.9%
20 28% 29%
23% 24% 30% 9.0% 8.1%
8.0% 7.3%
14 20% 6.7% 6.7%
10 7.0%
11
8 10%
7 18 6.0%
0 0% 5.0%
FY16 FY17 FY18 FY19 FY20 FY21 FY22 4.0%
Online + Web Aggregator + Brokers - Ind NBP (Rs bn) YoY (%, RHS) FY16 FY17 FY18 FY19 FY20 FY21 FY22

Source: IRDAI, Avendus Spark

Other general insurance products’ traction in the online channel is lower vs. Health

General Insurance GDPI (Ex Health) : On-line channel (Rs bn) General Insurance ex Health - Online % of Total (%)
25 60%
55% 1.6% 1.4%
20 20 19 40% 1.4%
33% 1.5%
1.2% 1.1%
15 13 13 20% 1.0%
1.0% 0.9%
10
10 0% 0.8%

-5% -28% 0.6%

5 -20%
0.4%
0 -40% 0.2%
FY18 FY19 FY20 FY21 FY22
0.0%
General Insurance ex Health - Online GDPI (Rs bn) YoY (%) FY18 FY19 FY20 FY21 FY22

Source: IRDAI, Avendus Spark

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 PB FINTECH | Rating: REDUCE | TP: Rs. 700

~1% market share gain in distribution revenue pool during FY23-27E shall lead to ~22% CAGR in insurance revenue for Policy Bazaar (Core + New Initiatives)
FY19-23 FY23-27E
Distributor Revenue pool (Rs bn) FY19 FY20 FY21 FY22 FY23 FY27E
CAGR CAGR
PB enjoys ~5% market share in addressable market premium and distributor
Life insurance - Individual commission pool
Industry
Commission 286 309 330 359 421 10% Policy Bazaar - Premium Market share (%)
6% 5.2%
Business Promotion 82 78 78 104 129 12%
Total 367 387 408 463 551 11% 5%
Pvt - Ex SBILIFE 3.6%
Commission 72 82 90 106 135 17% 4%
Business Promotion 47 50 54 77 105 22% 2.8%
3% 2.4%
Total 119 132 145 182 241 421 19% 15%
General Insurance (Motor + Retail Health + Travel) 1.6%
2% 1.1%
Industry 1.0% 0.8%
0.3% 0.5% 0.6%
Commission 90 93 102 112 129 10% 1% 0.2%
Business Promotion 52 72 85 112 148 30%
Total 141 165 187 224 277 18% 0%
FY18 FY19 FY20 FY21 FY22 FY23
Industry - Renewal Motor + Retail Health + Travel - Ex ICICIGI
Commission 61 65 74 84 96 12% Industry - Addressable market Total Industry
Business Promotion 26 38 46 61 83 33%
Total 88 103 119 145 180 348 20% 18%
Life + General Insurance
Policy Bazaar - Distributors Income Pool - Market share (%)
Industry
Commission 375 402 432 471 550 10% 6%
Business Promotion 133 150 163 216 278 20% 5.1%
Total 509 552 595 687 828 13% 5%
Pvt - Ex ICICIGI & SBILIFE 4% 3.7%
Commission 133 146 164 189 231 15% 3.0%
3% 2.5% 2.6%
Business Promotion 74 88 100 138 189 26%
1.7% 1.7%
Total 207 235 264 327 420 769 19% 16% 2% 1.3%
1.1%
Policy Bazaar 0.7%
1%
Insurance - Operating Revenue
Core 3.6 5.8 7.8 9.7 13.0 27.7 38% 21% 0%
New Initiatives 0.0 0.0 0.1 2.3 8.5 20.0 24% FY19 FY20 FY21 FY22 FY23
Total 3.6 5.8 7.9 12.0 21.5 47.7 56% 22%
% of Pvt Ex- ICICIGI & SBIGI Addressable distributors income pool (%) Total Industry
Core 1.7% 2.5% 3.0% 3.0% 3.1% 3.6%
New Initiatives 0.0% 0.0% 0.0% 0.7% 2.0% 2.6% Note: Addressable market is = Pvt Individual Life insurance excluding SBILIFE and General Insurance for Renewal Motor,
Total 1.7% 2.5% 3.0% 3.7% 5.1% 6.2% Retail Health and Travel excluding ICICIGI.
% of Total Distribution Income = Commission Paid + Business promotion spends done by Insurers
Core 0.7% 1.1% 1.3% 1.4% 1.6% Assumed Business promotion spend by insurers is largely towards Motor, Retail Health and PA
New Initiatives 0.0% 0.0% 0.0% 0.3% 1.0% Total Industry is commission pool is for Ind Life (incl Renewals) and Motor, Retail Health and Travel & business promotion
Total 0.7% 1.1% 1.3% 1.7% 2.6% spends
Source: Company data, IRDAI, Avendus Spark
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 PB FINTECH | Rating: REDUCE | TP: Rs. 700
Bima Sugam – A Game Changer?

Bima Sugam

▪ IRDAI intends to launch an online marketplace that would house all companies selling life and non-life insurance on a single platform.
▪ It allows buyers to purchase life, motor, or health insurance policies directly.
▪ This online platform is expected to provide you with a one-stop destination for all insurance needs, providing services like buying insurance policies, portability facilities, changing
insurance agents, and settling claims.
▪ Web aggregators, brokers, banks, and insurance agents will act as facilitators in selling insurance policies.
▪ The Bima Sugam platform shall provide all these facilities to policyholders with an e-insurance account (E-IA).
▪ Several insurance companies (both general and life insurers) and insurance broker association would become major shareholders of the Bima Sugam platform.
▪ IRDAI may ask the insurer to give a discount on premiums for the policies purchased directly through this platform (the contours of the discounting are not known yet).

▪ Centralised database (need to see along with compulsory KYC for all policies ( currently
General insurance policies don’t require KYC and dematerialisation of policies) Questions about Bima Sugam Impact
Benefits
▪ Assist buyers facing challenges with existing insurers/agents to port their respective
policies based on coverage and pricing
▪ Speedy acceptance of new/sandbox products
Idea is still under formulation
▪ Wide choice to pick and choose policies – operationally how would it Web aggregators could be
▪ Window to view all your policies (be it life or general), details and renewal dates work? impacted if the popularity of
▪ Policyholders can buy through assisted mode or directly Bima Sugam increases
How would the algorithm
work to show the insurance
Broad timelines: products on the platform?
Other distributors like POS
After multiple delays, the new launch date brokers might also face a
has been set at June 2024 How will distributors operate challenge
on Bima sugam?

Source: IRDAI, Avendus Spark

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PB Fintech

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PB FINTECH | Rating: REDUCE | TP: Rs. 700

Company Factsheet
Company
▪ PB Fintech Limited, is an online platform for financial products like insurance and lending. Policybazaar and Paisabazaar are the core business verticals for PB Fintech.
Background

Key Management Personal

▪ Mr. Yashish Dahiya, Chairman & Managing Director is the co-founder of PB Fintech. He has an undergraduate degree from IIT Delhi and a PG degree from IIM
Ahmedabad. He was previously associated with ITW Signode India Limited, Bain & Company Inc. (London), eBookers PLC (UK) and Cl2I Investments Limited.

▪ Mr. Alok Bansal, Exec. Vice Chairman & Whole time Director, is the co-founder of PB Fintech. He holds a PG Diploma in Management from IIM, Calcutta and a
Bachelor's degree from Shri Shahu Ji Maharaj University, Kanpur. He was previously associated with Voltas Limited, General Electric International Operations Co. Inc.
(India), iGate Global Solutions Limited, Mahindra and Mahindra Limited and FE Global Technology Services Private Limited.
Management
Depth ▪ Mr. Sarbvir Singh, Joint Group CEO & President of Policybazaar. He has an undergraduate degree from IIT, Delhi and a PG Diploma IIM, Ahmedabad. He has previously
served as Managing Partner of WaterBridge Capital Management LLP and as Managing Director of Capital 18, a part of the Network18 group.

▪ Mr. Naveen Kukreja is the co-founder & CEO of Paisabazaar. He has an undergraduate degree from Delhi University and a PG diploma from IIM Kolkata. He was
associated with Citibank N.A. (India), Capital One (Europe) Plc and Aviva Life Insurance Company India Limited.

▪ Mr. Mandeep Mehta is the Group CFO of PB Fintech. He has completed his undergraduate degree from SRCC and PG from IIM, Ahmedabad. He is also a member of
ICAI. He was previously the CFO of Max Financial Services. He has been associated with GlobalLogic, MetLife India Insurance, Paternoster, Jardine Lloyd Thompson and
Aviva Life

▪ As on 1QFY24, Policy Bazaar has 69.5mn registered customers of which 14.5mn are transacting customers, while Paisa Bazaar has 36.9mn credit score assessed
Customer base
customers of which 4.2mn transacted
▪ In FY23, Core businesses - Policybazaar (51%) and Paisabazaar (16%) - contributed 77% of the revenue mix and the rest is from new initiatives (PB Partners, PB
Revenue Mix
Corporate and UAE)
Market Share ▪ Policybazaar has a market share of 93% amongst online aggregators.
Auditors ▪ Price Waterhouse Chartered Accountants LLP

Source: Company data, Avendus Spark Page 13

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech is one of the largest online Insurance and Credit Distributors

New business models

Insurance Credit Business Other subsidiaries
emerging in Insurtech

Manufacturing White-
Other
Marketplace POSP PB Business Overseas Paisabazaar pure online labelling
subsidiaries
insurer business

Policybazaar ▪ Docprime
Policybazaar PB Partners Insurance PB Fintech FZ- Technologies
Brokers Pvt. LLC ▪ Icall Support
Ltd. Services
▪ Accurex
Competitors

Marketing and
Consulting PB Fintech is not in
these businesses yet.
▪ MyLoanCare

New Initiatives
Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 14
PB FINTECH | Rating: REDUCE | TP: Rs. 700

How global players have evolved from price comparison platforms to product providers to extend into other products

Price-comparison only Lead-generation only Broker Other products Product provider

In this model, In the most advanced scenario, the

At the most basic level, aggregator starts to fill in gaps; these
aggregators generate Some aggregators act as Aggregators often start
aggregators offer a products are often white-label
leads and sell them to brokers, providing digital out as specialists in one
simple solutions offered at a lower price
brokers or product advice and area but ultimately
price-comparison than the providers’ own brand.
providers. The initial recommendations in broaden their reach by
service financed
technology investment addition to lead incorporating more
through ads or listing PB Fintech has not entered as a
for this model is low, and generation. product verticals.
fees. product provider in the
the focus is on marketing.
marketplace.

Evolution of PB Fintech is very similar to global web aggregators but with more focus on health and life insurance

Got broker license

Paisa Bazaar registered as
Insurance Web Expanded physical presence in 125 cities
Incorporation investment
aggregator license through in-person appointments offering
advisor
sales, service and claims support

2010 2013 2018 2022

2008 2012 2015 2021

▪ Launched agent platform
pbpartners.com
Health Insurance Tele-assistance for sales Commenced operations
▪ Launched PB for Business
comparison and service in UAE.
Insurance for Corporates
and SMEs

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 15
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech: Policy Bazaar and Paisa Bazaar – Business in Pictures

PB Partners (POSP), PB Corporate and UAE are new initiatives for Policy Bazaar; Activation rate of policies per transacting customer has improved in last 3 years
New
Initiatives Policy per
Policy Bazaar - Premium (Rs bn) Policy Bazaar Premium Mix - By channel (%) Activation transiting
140 100% Rate (%) customer (no)
115.9 2% 3% 2%
120 5% 6% 6%
80% 20% 2.0
100 81% 11%
19% 15%
80 69.8 60%
63% 66%
60 20% 2.2
47.6 40%
37.8 47% 82%
40 30.1 73% 77%
23.2 24.3
12.9 20%
20 26% 24% 21% 2.4

0 0% FY22 FY23 1QFY24

FY18 FY19 FY20 FY21 FY22 FY23 1QFY231QFY24
21% 2.5
Total Premium (Marketplace + POSP+ Corp+ UAE) Rs bn YoY Market Place POSP Corporate UAE

Source: IRDAI, Company Data, Avendus Spark

After steep decline during COVID, Paisa Bazaar has witnessed sharp increase in disbursements and credit card issuance
Customer assessed Transaction
Paisa Bazaar - Disbursements (Rs bn) Paisa Bazaar - No of Credit Cards Issued ('000) Activation
Credit score (mn) per customer
Rate (%)
(no)
140 127% 150% 500 466 300%
120 75% 76% 250% 10% 1.41
100% 400
100 53% 262%
28% 200%
80 50% 300
186% 150%
60 0% 200 163
140 100% 11% 1.42
40 -55% 96
-50% 100 45 50%
20
29 51 65 29 66 116 23 35
0 -100% 0 46% 0%
FY18 FY19 FY20 FY21 FY22 FY23 1QFY231QFY24 FY21 FY22 FY23 1QFY23 1QFY24 11% 1.40

Disbursements (Rs, bn) YoY (%) No of Credit Cards ('000) YoY (%)

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 16
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech: Revenue contribution from core insurance business has seen steady decline; within core business, Credit business has grown at faster rate

PB Fintech FY19 FY20 FY21 FY22 FY23 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24

Operating Revenue (Rs bn)

Core Insurance 3,543 5,713 7,588 9,677 12,593 1,990 2,140 2,520 3,082 2,870 3,090 3,180 3,840 3,820

Core Credit 1,307 1,901 931 2,268 4,120 340 500 650 778 840 1,010 1,070 1,200 1,340

New Initiatives 0 0 120 2,250 8,480 40 160 500 1,540 1,340 1,640 1,850 3,650 1,490

Total 4,849 7,614 8,638 14,195 25,193 2,370 2,800 3,670 5,400 5,050 5,740 6,100 8,690 6,650

Mix (%)

Core Insurance 73% 75% 88% 68% 50% 84% 76% 69% 57% 57% 54% 52% 44% 57%

Core Credit 27% 25% 11% 16% 16% 14% 18% 18% 14% 17% 18% 18% 14% 20%

New Initiatives 0% 0% 1% 16% 34% 2% 6% 14% 29% 27% 29% 30% 42% 22%

YoY (%)

Core Insurance 61% 33% 28% 30% 44% 44% 26% 25% 33%

Core Credit 45% -51% 144% 82% 147% 102% 65% 54% 60%

New Initiatives 1775% 277% 3250% 925% 270% 137% 11%

Total 57% 13% 64% 77% 113% 105% 66% 61% 32%
Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 17
Policy Bazaar

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Policy Bazaar – Business Model

Positive Negative Neutral

Marketplace Model

Product Type Premium Pricing 1st Year Take Rate Renewal Rate Renewal Take Rate
Retail No change in premium Online plans –Commission
Business Pure Term, ROP, Zero cost Negligible trail
Life - Protection on renewals upfronted in 1st Year
commissions

ULIPs – Capital Guarantee, Non- No change in premium Online plans – Commission Negligible trail
Life - Savings
Par Savings on renewals upfronted in 1st Year commission
Online B2C
Indemnity health – 1 year and Premium increases 1st year higher vs. Strong Renewal trail
Retail - Health
3 years on renewal Renewal commission

Renewals - 2Ws & Cars – After Premium decline on

Limited renewal trail
Motor 1st year in OD & TP - After 3 yr renewal in OD; TP is Stable commission ratio
commission
Online B2C + in Cars & 5 yr in 2Ws tariffed
Offline Push
Travel Travel Point of Sale product One time commission No No Trail

▪ POSP business of PB is – motor, life and health. Motor has a higher contribution in the mix.
POSP ▪ The contribution of the life segment is higher vs. competition
▪ Currently this business is a cash burn as the commissions passed on are higher than the lead commission received
▪ Lower Profitability as large part of commission is passed to POSP
▪ Renewal rates in POSP are lower than direct channel
Corporate
▪ The corporate business of PB is focused more on the group cover whereas the commercial segments contribute lower to the mix
▪ It is currently a loss-making segment for PB Fintech

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 19
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Policy Bazaar: After 2 years, marketplace model saw pickup in growth in FY23 driven by renewal health & life savings; however, core growth was lower in 1QFY24
Management has taken conscious decision to moderate POSP business in 1QFY24; this should aid in better profitability
Policy Bazaar -Premium FY19 FY20 FY21 FY22 FY23 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24
Premium (Rs bn)
Marketplace - Policy Bazaar 23.2 37.6 47.0 57.4 84.8 15.3 12.8 13.8 15.6 18.6 19.5 21.5 25.2 23.0
POSP - PB partners 0.0 0.0 0.0 7.5 21.6 0.0 0.6 1.9 5.0 3.7 4.6 5.0 8.3 3.6
PB Corporate 0.0 0.0 0.0 3.6 6.5 0.4 0.6 1.8 0.9 1.5 0.7 3.1 1.2 2.2
PB Dubai 0.1 0.2 0.5 1.3 3.0 0.2 0.3 0.3 0.4 0.5 0.6 0.8 1.1 1.3
Total 23.2 37.8 47.6 69.8 115.9 15.9 14.2 17.8 21.8 24.3 25.5 30.3 35.9 30.1
Mix (%)
Marketplace - Policy Bazaar 100% 99% 99% 82% 73% 96% 90% 78% 71% 77% 77% 71% 70% 76%
POSP - PB partners 0% 0% 0% 11% 19% 0% 4% 11% 23% 15% 18% 16% 23% 12%
PB Corporate 0% 0% 0% 5% 6% 3% 4% 10% 4% 6% 3% 10% 3% 7%
PB Dubai 0% 1% 1% 2% 3% 2% 2% 2% 2% 2% 2% 3% 3% 4%
YoY (%)
Marketplace - Policy Bazaar 62% 25% 22% 48% 22% 53% 55% 62% 23%
POSP - PB partners 189% 18400% 667% 161% 68% -2%
PB Corporate 79% 263% 26% 70% 45% 53%
PB Dubai 175% 145% 132% 142% 113% 103% 167% 170% 155%
Total 63% 26% 47% 66% 52% 79% 70% 65% 24%

Unlike global businesses, life & health are significant contributors of revenue to Policy Bazaar

Policy Bazaar (Standalone) - Revenue Mix (%)

100%
17% 15% 15% 17% 18% 19%
80%
29% 26% 23% 23% 22% 18%
60%

40%
55% 59% 62% 60% 60% 63%
20%

0%
FY18 FY19 FY20 FY21 FY22 FY23

Life insurers General Insurers SAHIs

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 20
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Policy Bazaar: With an increase in savings contribution, the take rate in FY23 was under pressure; however, it improved in 1QFY24 led by strong growth in protection

79%
70%
Policy Bazaar - Premium (Rs bn) Policy Bazaar - Premium (Rs bn)

65%
62%
55%
53%
81% 81%

52%
120 90% 35 80%
63% 63% 66% 28 60%
100 75%

30.1 24%
23.0 23%
18.6 22%
80 48% 47% 60% 21
40%
14

15.3
12.8
13.8
15.6

19.5
21.5
25.2

10.7

15.9
14.2
17.8
21.8
24.3
25.5
30.3
35.9
31.1
60 45%

23.2
26%

0.7
1.5
4.0
6.2
5.7
5.9
8.8

7.1
24% 22% 7 20%

12.9
12.3

115.9
40 30%
12.9

23.2

37.8

47.0

57.4

84.8

37.8

47.6

69.8
0 0%

0.5
20 15%

3Q23

1Q23
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23

4Q23
1Q24

1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23
1Q24

1Q22
2Q22
3Q22
4Q22

2Q23
3Q23
4Q23
1Q24
0 0%
FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23
Core New Initiative Total
Core New Initiatives Total Policy Bazaar - Premium (Rs bn) YoY (%)

Policy Bazaar - Operating Revenue (Rs bn) Policy Bazaar - Operating Revenue (Rs bn)

66%
79%

61%
59%
10 80%

55%
25 80%
61% 61% 8

39%
60%

34%
20 51%

32%
31%
60% 6
42% 42%
15 34% 33% 37% 40%
8.5 40% 4
10 25% 20%
2

4.3

5.1
2.3
2.6
3.2
3.9
3.7
4.1

5.0
5.2

0.0
0.2
0.5
1.5
1.3
1.6
1.9
3.7
1.5

2.4
2.8
3.7
5.4

5.7
6.1
8.7
6.7
3.6
2.5
20%
2.3
13.0

12.0

21.5
5 0 0%
9.7
2.5

3.6

5.8

7.8

0.1

5.8

7.9

3Q23

1Q23
1Q22
2Q22
3Q22
4Q22
1Q23
2Q23

4Q23
1Q24

1Q22
2Q22
3Q22
4Q22
1Q23
2Q23
3Q23
4Q23
1Q24

1Q22
2Q22
3Q22
4Q22

2Q23
3Q23
4Q23
1Q24
0 0%
FY22
FY18

FY19

FY20

FY21

FY23

FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23
Core New Initiative Total
Core New Initiatives Total Policy Bazaar - Operating income (Rs bn) YoY (%)

Policy Bazaar - Take Rate (%) Policy Bazaar - Quarterly trend in take rate (%)
27.3%

34.2%
27.7%
30%
22.2%

40%

24.8%
23.7%
19.7%

19.7%

21.2%
21.0%

20.9%

20.9%
19.8%
18.5%
26%
18.2%

18.6%
18.2%

17.6%
17.3%
17.2%

17.0%
16.8%

16.6%

16.6%
16.9%

30%

16.2%
16.7%
16.6%

15.8%
15.4%

15.2%
14.8%
15.6%

15.6%
15.4%

15.4%
15.3%

13.0%

12.7%
12.5%
22%

10.9%
20%

6.1%
18%
14% 10%
10% 0%
FY18

FY21
FY19

FY20

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

FY18

FY19

FY20

FY21

FY22

FY23

Core New Initiative Tota

Core New Initiatives Total 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 21
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Policy Bazaar Marketplace: New business growth has softened; growth driven by renewal business
Core Business Premium Growth is led by renewal premium; new business premium has been relatively muted in last few quarters
Policy Bazaar Core Business FY19 FY20 FY21 FY22 FY23 1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24
Premium (Rs bn)
New 17.1 26.2 26.9 33.5 40.4 7.7 7.7 8.7 9.5 8.6 9.4 10.3 12.1 10.2
Renewal 6.0 11.4 20.1 23.9 44.5 7.6 5.1 5.2 6.1 10.0 10.2 11.1 13.1 12.7
Total 23.2 37.6 47.0 57.4 84.8 15.3 12.8 13.8 15.6 18.6 19.5 21.5 25.2 23.0
Mix (%)
New 74% 70% 57% 58% 48% 50% 60% 63% 61% 46% 48% 48% 48% 45%
Renewal 26% 30% 43% 42% 52% 50% 40% 37% 39% 54% 52% 52% 52% 55%
YoY (%)
New 53% 3% 25% 20% 12% 21% 19% 27% 19%
Renewal 89% 76% 19% 86% 32% 101% 116% 115% 27%
Total 62% 25% 22% 48% 22% 53% 55% 62% 23%
Renewal Rate (%) 49% 54% 51% 77% 66% 80% 81% 84% 68%

We believe the take rate in renewal business is under pressure due to higher contribution of life savings business which has lower take rate in renewal (online version of savings plans is being sold)

Core - Policy Bazaar Operating Revenue (Rs bn) Core - Policy Bazaar Revenue Mix (%) Core - Policy Bazaar - Take rate (%)
13.0
14 61% 70%
24.7%
12 60% 17% 23.0%
9.7 2.9 18% 18% 21% 21.1%
23% 22%
10 42% 50% 17.3% 18.1%
7.8 19.7%
8 2.2 33% 40%
5.8 16.6% 16.9%
1.6 25% 15.6% 15.4% 15.3%
6 30%
3.6 1.0 34% 100%
2.5 82% 82% 79%
4 20% 77% 78%
0.4 0.6 10.6% 10.0%
2 10% 8.9% 8.1%
2.5 3.0 4.8 6.2 7.5 10.1 6.6%
0 0%
FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23 FY18 FY19 FY20 FY21 FY22 FY23
New business Revenue Renewal Revenue Total YoY (%) New business Revenue Renewal Revenue New business Revenue Renewal Revenue Total

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 22
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Marketplace: D2C+offline model adopted to achieve better conversion rate and higher ticket size

D2C + offline model focuses on health, term and savings; improvement in new insurance premium per enquiry driven by both better ticket size and conversion rate

Policy Bazaar - Off-line presence (no) Indicative new business premium mix (%) - Core Policy New insurance premium per enquiry per month (Rs)
Bazaar 32%
100 1,800 35%
27% 27%
77 77 Offline, 20% 30%
80 1,600 20% 22%
25%
62
57 57 20%
60 51 1,400
45 9% 15%
40 37
32 10%

1,157

1,209

1,185

1,286

1,384

1,595

1,505

1,563

1,754

1,735
40 1,200
5%
15
20 1,000 0%

4QFY21

1QFY22

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24
0
Off Line Branches Off Line - no of cities
Online, 80%
Jun'21 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 New insurance premium per enquiry per month (Rs) YoY (%)

Life and health insurance businesses have concentration risk, as the largest insurer contributes 38% in life (Tata AIA) and 47%in health (Niva Bupa)

Policy Bazaar (Standalone) Life insurers - Revenue Mix (%) Policy Bazaar (Standalone) SAHIs - Revenue Mix (%) Policy Bazaar (Standalone) General insurers - Revenue Mix (%)

100% 5% 100% 4% 6% 100%

7% 5% 6%
23% 16% 14% 9%
19% 19% 6% 80% 31% 35% 37% 36%
80% 31% 80% 15%
38% 6% 22%
17% 14% 22% 7% 5%
60% 9% 60% 22% 22% 60% 6% 5%
11% 10% 6% 5%
14% 21% 9% 5% 5% 7%
28% 8% 7%
40% 11% 26% 16% 40% 28% 40% 9% 11% 11%
8%
15% 33% 12% 11% 8%
11% 16% 47% 15% 4%
20% 20% 20% 3% 7% 8%
34% 28% 33% 4% 8% 8%
24% 18% 16% 7% 5% 5%
15% 5% 6% 9% 9%
0% 0% 0% 3%
FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23 FY20 FY21 FY22 FY23
Godigit United Oriental Reliance HDFC Ergo
HDFCLIFE BALIC MAX IPRU TATA AIA Others Niva Care Star ABHI Others BAGIC IFFCO New India Royal Others

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 23
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

New Initiatives: POSP growth moderated in 1QFY24; PB to invest ~Rs. 1.5-2bn a year on new initiatives

POSP – to focus on non-motor and granular business; it has increased reach outside the Tier 1 market

Policy Bazaar - POSP Premium (%) POSP - Premium Mix (%) POSP - Geographic Mix (%) POSP - Geographic Mix (%)
23% 23%
10,000 25% 4% 6% 8% 9% 12%
18% 20%
8,000 15% 16% 20% 25%
34% 28% 24% 21% 21%
6,000 12% 15% 59% 23%
11% 74% 71% 70% 72%
4,000 0% 10% 13% 17% 24% 23%
4% 21%
4,950
1,900

3,700

4,600

4,950

8,330

3,610
2,000 5% 80% 75%
600
20

66%
0 0% 55% 53%
26% 29% 31% 30% 28% 48% 47% 44%
4QFY22
1QFY22

2QFY22

3QFY22

1QFY23

2QFY23

3QFY23

4QFY23

1QFY24
2QFY23 3QFY23 4QFY23 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24

POSP Premium (Rs mn) POSP % of total Premium Motor Non Motor Tier 1 Tier 2 & 3 North West South East

PB Corporate and PB Dubai witnessing steady growth on a low base

PB Corporate - Premium (Rs bn) PB Corporate - Group Health Market Share (%) PB Dubai - Premium (Rs bn)
3.5 10% 10% 12% 7% 6.1% 1.4 4% 5%
3.0 6% 5.2% 1.2
10% 4%
7% 5% 3%
2.5 8% 1.0 3%
6% 4% 2.9% 2% 3%
2.0 2.7% 0.8 2% 2% 2%
4% 4% 6% 3% 1.8% 1.8% 2% 2%
1.5 3% 3% 1.4% 0.6 2%
3% 4% 2% 1.1% 1.3%
1.0 2.6% 0.4
2% 1% 2.0% 1%
0.5 0.4 0.6 1.8 0.9 1.5 0.7 3.1 1.2 2.2 1.5% 0.2 0.2 0.3 0.3 0.4 0.5 0.6 0.8 1.1 1.3
0% 1.0% 1.2% 1.1%
0.0 0% 0.4% 0.6% 0.6% 0.0 0%
2QFY23

1QFY22

4QFY23

3QFY23

4QFY23

1QFY24
1QFY22

2QFY22

3QFY22

4QFY22

1QFY23

3QFY23

4QFY23

1QFY24

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23

3QFY23

1QFY24

1QFY22

2QFY22

3QFY22

4QFY22

1QFY23

2QFY23
PB Corporate - Premium (Rs bn) % of total premium Industry - Group Health Industry - Pvt Health PB Dubai - Premium (Rs bn) % of total

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 24
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Policy Bazaar: Individual protection business to drive growth; savings and new health growth to remain weak

Growth in Life insurance Protection business was under pressure, before picking up in 1FY24; growth in savings business, on the other hand, to remain weak in FY24E

Individual Protection (HDFCLIFE, IPRU, MAX, BALIC and Pvt Ex SBILIFE - Ind RWRP YoY (%) APE growth (ULIPs + Non Par) – HDFCLIFE, IPRU, MAX, BALIC
ABSLI) APE Growth (%) and ABSLI
30% 26%
80%
59% 25%
50% 50% 21%
60% 20% ULIP + Non Par 11%
40% 15% 11%
20% 5% 8% Non-Par 16%
10%
-6% 3%
0% -16% 5%
ULIP 7%
-20% 0%
FY19 FY20 FY21 FY22 FY23 1QFY24 FY20 FY21 FY22 FY23 5MFY24
0% 5% 10% 15% 20%
YoY (%) YoY (%) 1QFY24 - APE growth, YoY (%)

Strong growth in new business health in FY21 still driving growth ( led by renewals), but weakness in new business remains a concern. Motor growth led by new sales which is not a market for PB

Retail Health GDPI - Pvt + SAHI (ex- ICICIGI) - YoY Retail Health GDPI FY18 FY19 FY20 FY21 FY22 FY23 Motor GDPI Growth - Pvt ex ICICIGI (%, YoY)
40% 36% Retail Health GDPI (Rs bn) 158 183 205 263 307 354 25%
22% 21% 21%
35% 20% 19%
YoY (%) 26% 16% 12% 29% 17% 15%
30% Renewal Rate (%) - 15%
85% 85% 85% 85% 85% 85% 15%
23% Assumed 12%
25% 21% 22%
21% New Business (Rs bn)
51 49 49 89 84 93 10%
20%
YoY (%) 36% -5% 1% 82% -7% 11%
15% 5% 3%
Renewal (Rs bn) 107 135 156 174 224 261
10% 0%
FY20 FY21 FY22 FY23 5MFY24 YoY (%) 22% 26% 16% 12% 29% 17% FY18 FY19 FY20 FY21 FY22 FY23 5MFY24

Source: IRDAI, Company Data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 25
Paisa Bazaar

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Paisa Bazaar: Focus is to disburse loans / credit cards to the customer who have checked credit score at Paisa Bazaar

After COVID, there has been a strong growth in both disbursements and credit cards

Paisa Bazaar - Disbursements (Rs bn) Paisa Bazaar - No of Credit Cards Issued ('000)
140 127% 150% 500 262% 466 300%
120 75% 76% 250%
100% 400
100 53% 186%
28% 200%
80 50% 300
150%
60 0% 200 163 140 100%
40 -55% 96 46%
-50% 100 45 50%
20 29 51 65 29 66 116 23 35
0 -100% 0 0%
FY18 FY19 FY20 FY21 FY22 FY23 1QFY23 1QFY24 FY21 FY22 FY23 1QFY23 1QFY24

Disbursements (Rs, bn) YoY (%) No of Credit Cards ('000) YoY (%)

Paisa Bazaar enjoys ~12% market share in unsecured loans originated digitally (~12% of Majority of disbursement to the customer who checked credit score on Paisa Bazaar
unsecured loans are disbursed digitally)
Paisa Bazaar - Market share (%)
Disbursal/transaction from existing customers (%)
80% 75%
14.0%
11.7% 75% 71%
12.0% 67%
70%
10.0% 65% 60%
8.0% 60%
6.0% 55%
50%
4.0% 42%
1.4% 1.7% 45%
2.0% 40%
0.0% 35%
Total - Unsecured loans Credit Cards Digitally procured Unsecured 30%
Disbursement loans Disbursement FY19 FY20 FY21 FY22 FY23

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 27
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Paisa Bazaar: Focus on products that are co-created and have trail income

Increase in trail income shall provide stability to the top-line growth (esp. when credit growth for the system is weak)

Paisa Bazaar - Operating Revenue (Rs bn) Paisa Bazaar - Revenue Mix - New vs. Trail FY23 - Policy Bazaar - Business with Trails
(%)
5.0 4.1 2%
4.0 0.3 7% 53%

3.0 2.3 14%

1.9 36%
2.0 1.3 0.1
0.9 3.8 100%
0.8 98%
1.0 1.9 2.2
1.3 0.9 144% 93%
0.8
0.0 63% 82% 86%
45%
-1.0 -51%
FY18 FY19 FY20 FY21 FY22 FY23
FY21 FY22 FY23 1QFY24
New Trail Total operating Revenue YoY Credit Cards Disbursement
New Trail

Take rate improvement is led by strong growth in credit cards and trail income Focus on End-to-End digital products

Paisa Bazaar - Take Rate (% of disbursement) % of disbursement from Existing Paisa Bazaar - End to End Digital Penetration
customer (Credit Score) (%)
4.0% 3.8%
3.8% 3.5% 75%
3.6% 3.4%
3.4% 3.2% % of Unsecured Loans
44%
3.2% End to Digital
2.9% 70%
3.0% 2.7%
2.8% 2.6% 68%
2.6%
2.4% % of Credit Cards End to
75%
2.2% Digital
2.0% 1QFY22 1QFY23 1QFY24
FY18 FY19 FY20 FY21 FY22 FY23 1QFY24

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 28
Profitability

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech: Indicative Per Unit Economics – Profit pool sits in Renewal business

Renewal
FY23 - Rs mn New Premium Policy Bazaar Paisa Bazaar Core business New Initiatives Total
Premium
Premium 40,350 44,480 84,830 31,060 115,890
Take rate (%) 25.0% 6.5% 15.3% 27.3%
Revenue 10,098 2,880 12,978 4,120 17,098 8,480 25,578
Contribution Expenses 6,834 432 7,266 2,422 9,688 9,660 19,348
Contribution 3,264 2,448 5,712 1,698 7,410 -1,180 6,230
Contribution Margin 32% 85% 44% 41% 43% -14% 24%
Branding cost 1,950 0 1,950 650 2,600 0 2,600
Network cost 654 0 654 218 872 97 969
Other Employee cost 539 539 1,077 359 1,436 160 1,596
Other expenses 538 538 1,075 358 1,434 824 2,257
Total cost 10,515 1,508 12,023 4,008 16,030 10,740 26,770
Adjusted EBIDTA -416 1,372 956 112 1,068 -2,260 -1,192
Adjusted EBIDTA Margin -4% 48% 7% 3% 6% -27% -5%
Source: Company Data, Avendus Spark

Assumptions

▪ Assuming 25% of Core business contribution expense is towards Paisa Bazaar and the rest to Core Policy Bazaar; Contribution cost of renewal business is 15% of renewal income
▪ Assuming 10% of Network cost and non-contribution employee cost for New Initiative and the rest 90% towards Core business (both Policy & Paisa Bazaar)
▪ Branding and Network cost is only towards new business. 75% of this cost is towards Policy Bazaar and the rest for Paisa Bazaar
▪ Other employee costs and other expenses are allocated equally between new and renewal . 75% of these costs are towards Policy Bazaar and rest for Paisa Bazaar & others

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 30
PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech: Renewal take rates are best in health and shall be the biggest contributor to profit by FY27E
Retail health Premium (Rs mn) FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY23-27 CAGR
Industry
New 89,394 83,522 93,080 107,042 122,564 140,029 159,633 14%
Renewal 173,963 223,854 261,269 301,197 347,003 399,132 458,287 15%
Total Premium 263,357 307,375 354,349 408,239 469,567 539,161 617,920 15%
Renewal Rate -Assumed (%) 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0%
New business Growth (%) -6.6% 11.4% 15.0% 14.5% 14.3% 14.0%

Policy Bazaar
Health Premium (Rs mn) FY21 FY22 FY23 FY24 FY25 FY26 FY27
New 5,811 5,638 6,516 8,028 9,805 11,902 14,367 22%
Renewal 6,089 10,115 13,390 16,920 21,206 26,359 32,522 25%
Total Premium 11,900 15,753 19,905 24,948 31,011 38,262 46,889 24%
Renewal Rate (%) 85.0% 85.0% 85.0% 85.0% 85.0% 85.0% 85.0%
Assumed Market share (%) - New 6.50% 6.75% 7.00% 7.50% 8.00% 8.50% 9.00%
Renewal Market share (%) - Derived 3.5% 4.5% 5.1% 5.6% 6.1% 6.6% 7.1%
Total Market share (%) - Derived 4.5% 5.1% 5.6% 6.1% 6.6% 7.1% 7.6%

Take Rate - New business 30% 30% 30% 30% 30% 30% 30%
Take Rate - Renewal business 15% 15% 15% 15% 15% 15% 15%
Take Rate - Total 22.3% 20.4% 19.9% 19.8% 19.7% 19.7% 19.6%

Revenue - Retail Health FY21 FY22 FY23 FY24 FY25 FY26 FY27
- New 1,743 1,691 1,955 2,408 2,942 3,571 4,310 22%
- Renewal 913 1,517 2,008 2,538 3,181 3,954 4,878 25%
Total 2,657 3,209 3,963 4,946 6,122 7,525 9,188 23%

Contribution - Retail Health FY21 FY22 FY23 FY24 FY25 FY26 FY27
- New 0 0 0 0 0 0 0
- Renewal 776 1,290 1,707 2,157 2,704 3,361 4,147 25%
Total 776 1,290 1,707 2,157 2,704 3,361 4,147 25%

Contribution Margin FY21 FY22 FY23 FY24 FY25 FY26 FY27

New 0% 0% 0% 0% 0% 0% 0%
Renewal 85% 85% 85% 85% 85% 85% 85%
Total 29% 40% 43% 44% 44% 45% 45%
Source: IRDAI, Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 31
PB FINTECH | Rating: REDUCE | TP: Rs. 700

PB Fintech: Increase in renewal contribution in core business led to improvement in its total contribution and EBITDA margin

Core (Online Insurance + Credit) - Contribution Margin (%) New Initiatives (POSP + Corp+ UAE) - Contribution Margin (%) PB Fintech - Contribution Margin (%)
50% 43% 0% 50%
40% 38% -10% 40%
40% 40%
-20% -14%
30% -30% 30% 23% 24%
20% 14% -40% 20% 14%
9% -50% 9%
10% 10%
-60%
0% -70% -60% 0%
FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23

Core (Online Insurance+Credit) – Adjusted EBIDTA Margin (%) New Initiatives (POSP+Corp+UAE) – Adjusted EBIDTA Margin PB Fintech - Adjusted. EBIDTA Margin (%)
(%)
20% 6% 0%
0% -10%
0% -7% -5%
-20% -20%
-20% -7% -9% -30% -20%
-40% -27%
-40% -40%
-39% -50% -39%
-60%
-60%
-58% -60%
-80% -76% -58%
-80% -70%
FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23 FY19 FY20 FY21 FY22 FY23

FY19 - Core - New vs. Renewal mix FY20 - Core - New vs. Renewal mix FY21 - Core - New vs. Renewal mix FY22 - Core - New vs. Renewal mix FY23 - Core - New vs. Renewal mix

Renewal
Renewal Renewal,
26% Renewal
30% 43%
38%
New
Renewal
48%
New 52%
57% New
New 62%
New 70%
74%

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 32
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Adjusted EBIDTA margin turned positive in 4Q23/1Q24 with higher share of renewal and credit business turning positive

Core - Contribution Margin (%) New Initiatives - Contribution Margin (%) Total - Contribution Margin (%)
50% 0% 40%
45% 44% 45% 33%
44% 44% -20% -1% 29% 29%
45% 42% -10% 26%
40% -15% 30% 23% 25% 25%
-40% -26% 21%
40% -38%
35% -60% 20% 17%
35% -51%
31% -80%
30% 10%
-100% -82%
-98% -98%
25% -120% 0%
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24

Core - Adjusted EBIDTA Margin (%) New Initiatives - Adjusted EBIDTA Margin (%) Total - Adjusted EBIDTA Margin (%)
20% 13% 13% 0% 10% 3%
3%
6% -50% -10%
10% 3% 3% -40% -29% -31% 0%
1% -100% -58% -53%
0% -150% -102% -10% -5%
-131% -9%
-10% -200% -13%
-20% -15%
-13% -250% -18%
-20% -14%
-18% -300% -250% -30% -25% -25%
1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24

Operating Revenue Mix (%)

100% 2% 6%
14% 14% 23%
18% 29% 27% 28% 30%
18% 42%
14% 17% 18% 20%
18%
50% 14%
84% 76% 69%
57% 57% 54% 52% 57%
44%

0%
1QFY22 2QFY22 3QFY22 4QFY22 1QFY23 2QFY23 3QFY23 4QFY23 1QFY24
Core - Insurance Core - Credit New Intiaitives

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 33
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Management guidance to Rs ~10bn PAT by FY27E

Delta Impact
Rs. bn Rs. bn
on PAT -
FY23 FY27E
FY27E

Management guided for additional EBIDTA

Rs 1.07 bn Adj. EBITDA from the core business ~Rs 8.0 bn ~Rs 7.0 bn
of Rs. 1.5-2.0 bn every year

Loss of
New initiatives Loss from new initiatives will be zero by FY27 ~Rs 0bn ~Rs.2.25bn
Rs 2.26bn

ESOP cost from Rs 5.42 bn in FY23 shall be

Rs. 5.42bn ESOP cost ~Rs1.0 bn ~Rs 4.5 bn
reduced to Rs ~1.0 bn

Interest income from the cash on the balance 3.5bn of income in FY27 – 2.5bn of income in
Rs 2.59bn Rs 3.5 bn ~Rs 1.0 bn
sheet FY23

~Rs 14.75bn
Loss of PAT of Rs
Rs.15bn PAT Journey for FY24-27
Rs 4.9bn 10.5 bn

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 34
Valuation & Financials

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Market share gain and improvement in renewal rate (due to higher contribution of health) shall drive Policy Bazaar premium growth
We expect premium CAGR of 26% over FY23-27E led by core business; we see moderation in POSP business (after hyper-growth in FY21-23)
Policy Bazaar FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
Premium (Rs mn) Policy Bazaar - Premium Mix (%)
New 26,184 26,889 33,490 40,350 48,420 57,765 68,524 80,903
100% 1%
0% 1%
0% 2% 3% 4%
Renewal 11,406 20,121 23,939 44,480 65,319 87,776 112,572 140,387 5% 5% 7% 8%
6% 6%
Core business 37,590 47,010 57,429 84,830 113,739 145,541 181,095 221,289 90% 6% 6% 7%
11%
POSP 7,470 21,580 23,738 26,052 28,529 31,173 19% 16%
80% 13% 12% 11%
Corporate 3,610 6,450 8,708 11,603 15,268 19,849
UAE 220 540 1,251 3,030 6,060 10,605 15,908 22,271 70% 99% 99%
Total 37,810 47,550 69,760 115,890 152,245 193,801 240,799 294,583
YoY (Rs %) 60% 82%
73% 75% 75% 75% 75%
New 3% 25% 20% 20% 19% 19% 18%
50%
Renewal 76% 19% 86% 47% 34% 28% 25%
Core business 25% 22% 48% 34% 28% 24% 22% 40%
POSP 189% 10% 10% 10% 9% FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
Corporate 79% 35% 33% 32% 30%
UAE 132% 142% 100% 75% 50% 40% Core business POSP Corporate UAE
Total 26% 47% 66% 31% 27% 24% 22%

Improvement in renewal rate shall lead to higher contribution of renewal premium going ahead; higher renewal shall lead to compression in take rate

Policy Bazaar- Core business - New vs. Renewal (%) Policy Bazaar - Take Rate (%)
100% 30% 27.3%

80% 30%
43% 42% 25%
52% 57% 60% 62% 63% 21.0% 21.0% 21.0% 21.0%
60%
20% 18.2%
40% 18.5%
70% 16.7% 17.2% 16.5%
57% 58% 15.4% 16.1% 15.8% 15.6%
48% 15% 16.9%
20% 43% 40% 38% 37% 16.6%
15.5% 15.3% 15.0% 14.5% 14.1% 13.8%
0% 10%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

New Renewal Core business New intiatives Total

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 36
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

We expect operating Revenue CAGR of 27% over FY23-27E led by Paisa Bazaar; core Policy Bazaar revenue to grow at CAGR of 23% in FY23-27E
Market share gain and increase in digital sourcing shall drive growth for Paisa Bazaar disbursement growth

Paisa Bazaar - Disbursement (Rs bn) Take Rate (Paisa Bazaar revenue % of disbursements)
600 127% 150% 3.7% 3.5% 3.5% 3.5% 3.5% 3.5%
500 76% 3.4%
100% 3.5%
55% 50% 45%
400 40%
50% 3.3% 3.2%
300
0% 3.1%
200 -55% 2.9%
100 -50% 2.9%
29 66 116 180 270 392 548
0 65 -100% 2.7%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
2.5%
Disbursements (Rs bn) % YoY FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Improvement in renewal rate shall lead to higher contribution of renewal premium going ahead; higher renewal shall lead to compression in take rate
Operating Revenue FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E FY20-23 CAGR FY23-27E CAGR
Rs bn
Core Insurance 5.8 7.8 9.7 13.0 17.1 21.1 25.5 30.6 31% 24%
Core Credit 1.9 0.9 2.3 4.1 6.4 9.5 13.7 19.1 29% 47%
Core -Total 7.7 8.7 12.0 17.1 23.5 30.6 39.3 49.8 30% 31%
New Initiatives 0.0 0.1 2.3 8.5 8.1 10.1 12.5 15.4 N.M 16%
Total 7.7 8.9 14.2 25.6 31.6 40.7 51.8 65.1 49% 26%
YoY (%)
Core Insurance 34% 25% 33% 32% 23% 21% 20%
Core Credit -51% 144% 82% 55% 49% 44% 39%
Core -Total 13% 37% 43% 37% 30% 28% 27%
New Initiatives N.M 1775% 277% -5% 25% 24% 23%
Total 15% 61% 80% 23% 29% 27% 26%
Mix
Core Insurance 75% 88% 68% 51% 54% 52% 49% 47%
Core Credit 25% 10% 16% 16% 20% 23% 27% 29%
Core -Total 100% 99% 84% 67% 74% 75% 76% 76%
New Initiatives 0% 1% 16% 33% 26% 25% 24% 24%
Total 100% 100% 100% 100% 100% 100% 100% 100%
Source: Company data, Avendus Spark
This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 37
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Cost ratio to improve led by 1) Lower growth in other opex, 2) Efficiency leading to lower contribution expense and 3) Decline in ESOP costs
Network cost, branding cost and other employee cost to grow at lower rate vs. revenue growth; as guided, ESOP cost shall reduce to Rs. 1bn by FY27E

PB Fintech - Other expenses Excluding ESOP & Contribution expenses (Rs bn) PB Fintech - ESOP cost trend (Rs bn)

20.0 44% 50% 7.0 518% 600%

489%
40% 6.0 500%
15.0 5.0 400%
23% 30% 5.4
21% 21% 20% 19% 4.0 300%
10.0 20%
3.0 3.4 200%
10%
5.0 0% 2.0 -3% 100%
1.0 -11% -37%
0% 2.0 -47%
4.7 4.7 6.7 8.3 10.0 12.1 14.5 17.3 1.0 0%
0.2 6.1 -42% 1.1 1.0
0.0 -10% 0.0 -100%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Other expenses (Ex - ESOP & Contribution expenses) YoY (%) ESOP cost (Rs bn) YoY (%)

Operating leverage to improve other expenses ratio, while contribution expense improvement to be driven by efficiency and lower cash burn in new initiatives

Other expenses (Ex - ESOP & Contribution expenses) % of operating revenue Contribution expenses % of operating revenue (%)
70% 180% 160%
61%
60% 53%
47% 135% 114% 108% 105% 103% 101%
50%
86%
77% 76%
40% 32% 90% 67% 65% 64% 63%
32% 30% 60%
28% 27% 86%
30%
45% 62%
60% 57% 53% 52% 52%
20% 52%
0%
10%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
0%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E Core New Initiatives Total

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 38
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

We estimate PAT to be lower than the management guidance of Rs. 10bn in FY27E
With lower burn in new initiatives, we expect margins to improve; we anticipate EBITDA Margin of 11% by FY27E

PB Fintech - Cost to income ratio (%) PB Fintech - Contribution, EBIDTA and Adj EBIDTA Margin (%)

180% 167% 60% 40%

33% 35% 36% 37%
40% 23% 24%
160% 149% 14%
20%
8% 10% 13%
0% 5%
140% 129% -7% -5% 8% 11%
124% -20% 3%
-21% -6%
120% 109% -40% -39% -18%
-26%
100% -60% -41%
94% 92%
100%
-80% -63%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
80%
FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E Contribtuion Margin EBIDTA margin Adj EBIDTA Margin

We estimate PAT at Rs 9.1bn in FY27E which is lower than the management guidance of Rs 10bn

PB Fintech - Contribution profit, EBIDTA, Adj EBIDTA and PAT

23.9
25.0
18.5
20.0
14.1
15.0 10.5
8.2 9.1
10.0 6.2 7.2 6.1
4.3 5.4
3.5 3.2 3.3 3.0
5.0 1.1 1.3 1.6 0.1
0.0
-5.0 -1.6 -1.8 -0.6 -1.2 -1.5
-3.2 -3.0 -3.0 -3.0
-4.9
-10.0 -6.6
-9.0 -8.3
Contribtuion EBIDTA Adj EBIDTA PAT

FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 39
 PB FINTECH | Rating: REDUCE | TP: Rs. 700

Valuation Summary
Valuation Summary Sep'25 Key Assumptions FY20-23 FY23-26E FY26-30E FY30-40E
(CAGR / Avg.)
Adjusted EBIDTA (Rs bn) 4.3
Revenue growth 49.1% 27.4% 23.4% 15.9%
Implied EV/ Adj EBIDTA (x) 67
C-I ratio 140.2% 101.6% 89.9% 85.3%
EV 289.2
EBIDTA Margin -35.7% 1.5% 12.2% 15.8%
Sep'24 Cash & Equivalent (Rs bn) 52.7 PAT growth N.M N.M 27.4% 18.5%
Valuation (Rs bn) 341.9 Avg. RoE -13.6% 4.9% 13.2% 16.6%

Risk Disc. Rate (RDR) 12.0%

Discount for Holdco Structure 0
Terminal RDR 12.0%
NOSH (mn) 488
Terminal Growth 7.5%
Target Price (Rs.) 700

CMP (Rs.) 742 30

PB Fintech 1yr Fwd. EV/Sales
Upside -6% 25

20
Sep'25 15
Core EPS - Sep'25 (Rs.) 2.9 10
Reported EPS - Sep'25 (Rs) 9.3
5
5.68
Core P/E -Sep'25 201.2
0

Aug-22

Aug-23
Mar-22

Mar-23
Dec-21

Dec-22
Jan-23
Apr-22
May-22

Apr-23
May-23
Jun-22

Oct-22

Jun-23
Nov-21

Jan-22

Nov-22
Feb-22

Jul-22

Sep-22

Feb-23

Jul-23

Sep-23
P/E - Sep'25 75.6x

EV / Sales - Sep'25 6.2x

EV/Sales Mean +1 SD -1 SD
EV / Core Sales - Sep'25 8.3x

Source: Company data, Avendus Spark

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 40
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Financial Summary

P&L (Rs mn) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Core - Insurance 2,539 3,616 5,812 7,816 9,731 12,978 17,088 21,068 25,543 30,609

Core - Credit 800 1,307 1,901 931 2,268 4,120 6,386 9,526 13,741 19,144

New Initiatives 0 0 0 120 2,250 8,480 8,086 10,135 12,538 15,392

Revenue from operations 3,339 4,922 7,713 8,867 14,249 25,578 31,561 40,729 51,822 65,145

Other income 264 366 843 708 1,254 2,590 3,030 2,995 3,176 3,537

Total Revenue 3,603 5,288 8,556 9,574 15,503 28,168 34,590 43,724 54,998 68,682

Employee cost 1,782 3,976 5,208 5,540 12,555 15,396 15,211 16,727 19,243 23,255

Advertising and promotion 1,422 3,459 4,452 3,678 8,645 13,572 14,065 17,424 21,443 26,193

Finance cost 0 75 119 115 136 214 263 290 319 351

Depreciation & Amortisation 74 304 473 414 428 638 825 981 1,127 1,270

Network and internet expenses 163 317 508 588 695 969 1,136 1,385 1,684 1,954

Other expenses 498 531 744 657 1,377 2,257 2,973 3,932 5,122 6,590

Total Operating expense 3,939 8,662 11,504 10,993 23,836 33,046 34,474 40,739 48,937 59,614

ESOP cost 0 506 167 983 6,072 5,424 3,434 2,004 1,056 1,025

EBITDA -525 -3,361 -3,199 -1,598 -9,023 -6,616 -1,825 1,260 4,330 7,152

Adjusted EBIDTA -525 -2,855 -3,032 -615 -2,951 -1,192 1,609 3,264 5,386 8,177

PBT -335 -3,374 -2,948 -1,419 -8,334 -4,878 116 2,985 6,061 9,068

Tax 257 94 92 83 -5 0 0 0 0 0

PAT -592 -3,468 -3,040 -1,502 -8,329 -4,878 116 2,985 6,061 9,068

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 41
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Financial Summary

Balance Sheet (Rs mn) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Cash & Bank Balance 480 2,674 11,056 18,102 37,002 7,627 4,777 3,288 4,459 8,178

Loans 73 107 130 83 5 129 139 149 159 171

Receivables 961 1,313 1,788 1,729 3,609 6,773 5,479 6,932 8,875 11,216

Other financial assets 6,530 1,256 31 1,460 15,155 43,175 46,652 50,436 54,553 59,036

Total Financial Assets 8,044 5,349 13,005 21,374 55,771 57,705 57,047 60,805 68,046 78,601

Fixed Assets & Intangibles 108 339 460 271 607 1,119 1,334 1,502 1,664 1,809

Right to use assets 0 850 1,013 977 1,442 2,014 2,263 2,443 2,499 2,505

Deferred & Current Tax Assets 94 817 1,117 550 792 1,289 1,302 1,315 1,328 1,342

Other non-financial Assets 551 159 164 136 543 413 529 664 845 1,062

Total Non-Financial Assets 753 2,165 2,755 1,933 3,384 4,835 5,428 5,924 6,336 6,718

Total Assets 8,797 7,514 15,760 23,307 59,154 62,540 62,476 66,729 74,382 85,318

Shareholders equity 7,878 4,903 12,658 19,917 54,117 54,848 54,964 57,949 64,010 73,078

Trade Payables 468 1,110 1,179 1,019 1,982 3,061 2,740 3,466 4,437 5,608

Other financial liabilities 166 1,173 1,449 1,531 2,311 3,454 3,800 4,180 4,598 5,058

Non-Financial liabilities 286 328 473 839 745 1,177 972 1,134 1,337 1,574

Total Liabilities 8,797 7,514 15,760 23,307 59,154 62,540 62,476 66,729 74,382 85,318

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 42
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Financial Summary

Revenue mix (%) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Core - Insurance 76% 73% 75% 88% 68% 51% 54% 52% 49% 47%
Core - Credit 24% 27% 25% 10% 16% 16% 20% 23% 27% 29%
New Initiatives 0% 0% 0% 1% 16% 33% 26% 25% 24% 24%

Key Parameters FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
Insurance
Premium - Core 12,860 23,150 37,590 47,010 57,419 84,830 1,13,739 1,45,541 1,81,095 2,21,289
Premium - New Initiatives 0 80 220 540 12,331 31,060 38,506 48,260 59,704 73,293
Total Premium 12,860 23,230 37,810 47,550 69,750 1,15,890 1,52,245 1,93,801 2,40,799 2,94,583
YoY (%) 81% 63% 26% 47% 66% 31% 27% 24% 22%
Credit
Disbursals 29,180 51,015 65,496 29,168 66,070 1,16,190 1,80,095 2,70,142 3,91,706 5,48,388
YoY (%) 75% 28% -55% 127% 76% 55% 50% 45% 40%

Growth & margin ratios (%) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E
Revenue growth 47% 62% 12% 62% 82% 23% 26% 26% 25%
Cost to income ratio (%) 109% 164% 134% 115% 154% 117% 100% 93% 89% 87%
EBIDTA growth 540% -5% -50% 465% -27% -72% -169% 244% 65%
PAT growth 486% -12% -51% 454% -41% -102% 2471% 103% 50%
EBIDTA margin -15.7% -68.3% -41.5% -18.0% -63.3% -25.9% -5.8% 3.1% 8.4% 11.0%
Adj EBIDTA Margin -15.7% -58.0% -39.3% -6.9% -20.7% -4.7% 5.1% 8.0% 10.4% 12.6%
PAT Margin -16.4% -65.6% -35.5% -15.7% -53.7% -17.3% 0.3% 6.8% 11.0% 13.2%

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 43
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Financial Summary

Per share Data (Rs) FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

Diluted No of share o/s 488 488 488 488 488 488 488 488 488 488
EPS -1.2 -7.1 -6.2 -3.1 -17.1 -10.0 0.2 6.1 12.4 18.6
EPS growth (%) 486% -12% -51% 454% -41% -102% 2471% 103% 50%
BVPS 16.1 10.0 25.9 40.8 110.9 112.4 112.6 118.7 131.1 149.7
BVPS growth (%) -38% 158% 57% 172% 1% 0% 5% 10% 14%
DPS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Dividend Payout Ratio (%) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Valuation Metrics FY18 FY19 FY20 FY21 FY22 FY23 FY24E FY25E FY26E FY27E

P/E -612.0 -104.4 -119.1 -241.1 -43.5 -74.2 3119.1 121.3 59.8 39.9
P/B 46.0 73.9 28.6 18.2 6.7 6.6 6.6 6.3 5.7 5.0
EV/ Sales 107.7 72.1 46.4 39.6 24.0 12.1 9.9 7.6 5.9 4.7
EV/ EBIDTA -684.5 -105.7 -112.0 -219.7 -38.0 -46.9 -170.6 246.4 71.2 42.4
ROE (%) -11% -54% -35% -9% -23% -9% 0% 5% 10% 13%
ROA (%) -9% -43% -26% -8% -20% -8% 0% 5% 9% 11%
Dividend Yield (%) 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 44
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Crystal Ball Gazing

PB Fintech is the leader in the financial products aggregation space for financial products in India. With growth in the highly profitable renewal business and expansion in new
initiatives, it is set to achieve profitability by FY27. The revenue will grow at 26.3% CAGR during FY23-27E and PB Fintech is expected to deliver Adj. EBITDA margin of 13% by
FY27E.

Top line to grow at 26.3% CAGR during FY23-27E. Adj. EBITDA Expect Avg. ROE of ~7.2% during FY23-FY27E, with BVPS CAGR
Expect multiples to settle at 4.9x
margin to improve to ~25.9% during the same period. of 7.4%

FY19-23 FY23-27E FY19-23 FY23-27E Op. Revenue (Rs.

EV/Sales multiple Price target
ROE -25.9% 7.2% bn) – Sep’27
Revenue CAGR 51.0% 26.3%

C-I Ratio 136.8% 92.2% ROA -20.9% 6.2% 4.9 73 775

EBITDA CAGR N.M N.M EPS CAGR N.M N.M

Adj. EBITDA Margin -25.9% 9.0% BVPS CAGR 82.9% 7.4%

PAT CAGR N.M N.M

Total
Cumulative Dividends BVPS CAGR of 7.4%, exit Return of
Entry = Rs. 742 @ 8.6x
NIL multiple of 4.9x 4%

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 45
Global Peers

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Moneysupermarket.com, UK listed aggregator

Moneysupermarket.com Group PLC is a British price comparison website-based Particulars ( in GBP Million) CY16 CY17 CY18 CY19 CY20 CY21 CY22
business specializing in financial services. The website enables consumers to compare Revenue 316.4 329.7 355.6 388.4 344.9 316.7 387.6
prices on a range of products, including energy, car insurance, home insurance, travel
insurance, mortgages, credit cards and loans. It is a GBP 1.3bn market cap company Cost of Sales -79.6 -85.2 -102.3 -122 -115.4 -93.8 -125.1
trading at 14x 1yr Fwd. PE Gross Profit 236.8 244.5 253.3 266.4 229.5 222.9 262.5

Distribution Expenses -34.3 -29.3 -30.2 -29.9 -34.3 -29.5 -40.1

Movement of Market Cap.(GBP mn.)
Marketing Margin 202.5 215.2 223.1 236.5 195.2 193.4 222.4
2,500

2,000 Marketing Margin (%) 64% 65% 63% 61% 57% 61% 57%
1,308
1,500 Administrative Expenses -81.6 -90.3 -100.4 -97.3 -87.4 -96.5 -106.9

1,000 EBIDTA 120.9 124.9 122.7 139.2 107.8 96.9 115.5

500 EBIDTA margin 38% 38% 35% 36% 31% 31% 30%
0 Depreciation & Amortisation -27.5 -20.7 -14.7 -20.9 -20.8 -23.5 -26.5

May-22
May-12

May-14

May-16

May-18

May-20
Sep-11

Jan-13

Sep-13

Jan-15

Sep-15

Jan-17

Sep-17

Jan-19

Sep-19

Jan-21

Sep-21

Jan-23

Sep-23
Impairment of intangible assets -2.2 -9.3 0 0 0 0 0

Operating Profit 91.2 94.9 108 118.3 87 73.4 89

Moneysupermarket Revenue Mix
Other income 0.8 2 0.4 0.5 2.9 -1.1 0
100% 2% 5%
11% 10% 11% 19%
22% Finance cost -0.7 -0.8 -1.1 -2.2 -2.1 -2.1 -3.8
80% 12% 14% 18% 30%
10%
60% 25% 25% 22% 24% PBT 91.3 96.1 107.3 116.6 87.8 70.2 85.2
18% 27%
40% Tax -17.8 -18 -20.3 21.1 -18.5 -18.1 -15.9
53% 51% 49% 50% 50% 44%
20%
PAT 73.5 78.1 87 137.7 69.3 52.1 69.3
0%
CY17 CY18 CY19 CY20 CY21 CY22 Tax rate (%) 19% 19% 19% -18% 21% 26% 19%
Insurance Money Home Services Others PAT margin (%) 23% 24% 24% 35% 20% 16% 18%
Source: Company data, Avendus Spark
This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 47
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Goosehead, US listed aggregator

Goosehead Insurance is a US price comparison website-based business specializing in USD mn FY17 FY18 FY19 FY20 FY21 FY22
independent personal lines insurance. Goosehead represents over 140 insurance Revenues:
companies that underwrite personal lines and small commercial lines risks, and its Commissions and agency fees 27 37 46 72 83 100
operations include a network of nine corporate sales offices and over 1,400 operating
Franchise revenues 15 23 31 44 68 108
and contracted franchises. It is a USD 2.9bn market cap company trading at 48x 1yr
Fwd. PE Interest income 0 0 1 1 1 1

Total revenues 43 60 77 117 151 209

Movement of Market Cap. (USD mn.)
7,000
Operating Expenses:
6,000 Employee compensation and benefits 25 58 42 67 95 133
5,000
General and administrative expenses 9 13 19 25 40 53
4,000 2,908
3,000 Bad debts 1 1 1 2 3 6
2,000 Depreciation and amortization 1 1 2 3 5 7
1,000
Total operating expenses 35 74 63 97 143 199
0
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22

Jul-23
Apr-18

Apr-19

Apr-20

Apr-21

Apr-22

Apr-23
Jan-19

Jan-20

Jan-21

Jan-22

Jan-23
Oct-18

Oct-19

Oct-20

Oct-21

Oct-22
Income from operations 8 -14 14 20 9 10

EBITDA 8 -12 16 23 14 17

EBITDA Margin 20% -21% 21% 20% 9% 8%

Goosehead Insurance - Written Premium Mix (%)
100% 1% 1% 1% Other Income:
2% 3% 2%
80% 42% 40% 39% Other income 4 -0 0 0 0 0
60%
Interest expense -2 -4 -2 -2 -3 -5
40%
55% 57% 57% PBT 9 -18 12 18 6 5
20%
0% Tax expense (benefit) - 0 1 -1 -2 2
CY20 CY21 CY22
PAT 9 -19 10 19 8 3
Premium Mix Homeowner Automotive Commercial
PAT Margin 20% -31% 13% 16% 5% 1%
Source: Company data, Avendus Spark
This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 48
PB FINTECH | Rating: REDUCE | TP: Rs. 700

Glossary

ARPU Average Revenue Per User ROA Return on Assets

AUM Assets Under Management ROE Return on Equity
B2C Business to Consumer TI Total Income
TP Target Price
CAC Customer Acquisition Cost
ULIP Unit Linked Insurance Plan
CAGR Compounded Annual Growth Rate
YoY Year on year
CMP Current Market Price
C-I ratio Cost to Income ratio
D2C Direct to consumer
DCF Discounted Cash Flow
EBIT Earnings Before Interest and Tax
EBITDA Earnings Before Interest, Tax, Depreciation and Amortisation
EPS Earnings per share
ESOP Employee Stock Ownership Plan
Govt. Government
GDPI Gross Direct Premium Income
LTV Life time Value
MF Mutual Fund
Mkt Market
MTF Margin Trade Facility
Opex Operating Expenses
PAT Profit After Tax
PBT Profits Before Tax
P&L Profit & Loss
POSP Point of Sale Person
P/ABV Price to Adjusted Book Value
P/BV Price to Book Value
P/E Price to Earnings

This file was downloaded from Avendus Spark Research website by chirag.shah@avendus.com|November 01, 2023 15:24:35 Page 49
 Avendus Spark Disclaimer

BUY Stock expected to provide positive returns of >15% over a 1-year horizon REDUCE Stock expected to provide returns of <5% – 10% over a 1-year horizon
Absolute Rating
Interpretation
ADD Stock expected to provide positive returns of >5% – <15% over a 1-year horizon SELL Stock expected to fall >10% over a 1-year horizon

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