POLICYBZRNSEQ1 FY'23August 15, 2022

PB Fintech Limited

9,276words

154turns

11analyst exchanges

6executives

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Management on call

Yashish Dahiya

CHAIRMAN & CHIEF EXECUTIVE OFFICER, PB FINTECH LIMITED

Alok Bansal

EXECUTIVE VICE CHAIRMAN &

Sarbvir Singh

PRESIDENT, POLICYBAZAAR

Naveen Kukreja

CHIEF EXECUTIVE OFFICER, PAIZABAZAAR

Mandeep Mehta

CHIEF FINANCIAL OFFICER, PB FINTECH LIMITED

Rasleen Kaur

HEAD, CORPORATE STRATEGY

Key numbers — 40 extracted

rs,

s in India do their research on Policybazaar. This leads to a higher persistency for these consumers, because having done their research, they somewhat know what they are purchasing and hence their li

32%

gital enquiry and continue to improve it, as demonstrated by the increased premium for enquiry of 32% over the last 12-months. As a third leg, we continue to improve the platform in terms of consumer

83%

terms of consumer onboarding, service and claim capability, demonstrated by the CSAT which is at 83%, and the number of unprompted customer messages we receive every day on claim support as well as

59%

usinesses, the Insurance Marketplace Policybazaar and the Credit Marketplace Paisabazaar, grew at 59% year-on-year, and have now been adjusted EBITDA-positive for a second quarter running. Out of the

₹ 84 crore

DA-positive for a second quarter running. Out of the total revenue, the credit linked revenue was ₹ 84 crores for the last quarter. For our insurance business, we had an adjusted EBITDA of ₹ 18 crores pos

₹ 18 crore

was ₹ 84 crores for the last quarter. For our insurance business, we had an adjusted EBITDA of ₹ 18 crores positive for the last quarter. For complicated products like health and life insuran

₹ 270 crore

also extended on- ground claims support in 114 cities as of date. Our renewals revenue is now at ₹ 270 crores annual run rate, and as we have previously mentioned roughly 85% of this flows directly to the b

85%

ewals revenue is now at ₹ 270 crores annual run rate, and as we have previously mentioned roughly 85% of this flows directly to the bottom line. Paisabazaar, our credit marketplace continues to grow

₹ 11,200 crore

nues to grow very well and has rebounded strongly from COVID. We are now at an annual run rate of ₹ 11,200 crores disbursal and 4.3 lakh credit cards issued. We have over 29.5 million customers who have accesse

4.3 lakh

rebounded strongly from COVID. We are now at an annual run rate of ₹ 11,200 crores disbursal and 4.3 lakh credit cards issued. We have over 29.5 million customers who have accessed the credit score pla

29.5 million

at an annual run rate of ₹ 11,200 crores disbursal and 4.3 lakh credit cards issued. We have over 29.5 million customers who have accessed the credit score platform in 823 towns. This number represents 13% of

13%

illion customers who have accessed the credit score platform in 823 towns. This number represents 13% of India's active credit score consumers. 75% of these consumers are from non-metros. With increa

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Guidance — 20 items

Yashish Dahiya

opening

“And I'm quite pleased to say, at this stage, we expect the credit business to turn adjusted EBITDA-positive by Q4 this year.”

Alok Bansal

“So from 2024, '25, I think ESOP charges will be quite miniscule compared to the sort of EBITDA we will provide.”

Sachin

“Clearly, while you guys have given a guidance of ₹ 200 crores, the kind of investments we have made look a bit conservative as compared to ₹ 200 crores.”

Nikhil Agrawal

“Sir, with regard to the new initiatives and investment that you mentioned, so given that we have started the physical model, and we started to begin a physical presence in the form of stores, and we have the target of establishing more than 200 stores by FY'24, Why do we see a reduction in the expenditure in the new initiatives as of this quarter?”

Nikhil Agrawal

“Going forward in the POSP business, as we've been doing this, the third-party agents on come on our platform and sell our insurance products, and we forego major part of the fee to them.”

Nikhil Agrawal

“So going forward, how much of that is going to be given to the third-party agents?”

Sarbvir Singh

“So, as that happens, we will be able to retain more as we go along, and you will see the impact of that as the quarters develop.”

Nikhil Agrawal

“Any target for physical presence for this year in the form of stores?”

Sarbvir Singh

“We expect that as the economics prove themselves out, we will continue to expand both the number of people in the field as well as the number of stores.”

Sachin Dixit

“Just like it's become a significant part of your revenue today, right, so, would be helpful going forward at least?”

Risks & concerns — 10 flagged

The impact of inflation is also fairly subdued on our business so far.

— Sarbvir Singh

So, as that happens, we will be able to retain more as we go along, and you will see the impact of that as the quarters develop.

— Sarbvir Singh

So is it because of slowdown or is there something to read into it?

— Dipanjan Ghosh

So there isn't any slowdown, etc., so to say this year from that perspective.

— Alok Bansal

So what really explains that 6%, 7% decline in the existing revenue, is it some product mix, what explains that decline despite whatever 10%, 12% increase that we've seen in the disbursals, premiums and the renewal revenue also?

— Abhishek Khanna

— Yashish Dahiya

So are you saying that the decline is in your new business premiums, is that the case?

— Abhishek Khanna

See, from 2009 to 2017, you saw a steady decline every year in term insurance prices.

— Yashish Dahiya

My assessment is there is very clear understanding at the reinsurance end now that there is differential risk across channels… and I don't talk about just Policybazaar here, okay, I talk about the entire Policybazaar, the insurance companies websites, etc., they are at a differential risk for disclosure reasons or whatever reasons.

— Yashish Dahiya

For those who understand there is a TROP segment and there's a term segment and the TROP can have slightly higher premiums, but the risk component that is limited.

— Yashish Dahiya

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Q&A — 11 exchanges

I have a few questions. So first question I would actually like to understand how is the mix for your business change as we are recovering away from COVID in terms of health, motor, life, any specific changes we are seeing out there? And a related question is, hopefully, your business is not too impacted. But any impact on the back of inflation have we seen?

Sarbvir Singh

Sachin, on the first part, we've seen a stronger growth in motor in Q1 than other businesses just because last year was very low. But otherwise, as Yashish mentioned, health and term, we were able to build despite the drop in enquiries from last year. So we're not seeing any major change in the mix of our business in the first quarter. The impact of inflation is also fairly subdued on our business so far. I think there is some general impact on the economy, but for our business has been fairly subdued. Second question is, you guys mentioned on being close to adjusted EBITDA breakeven by 4Q. An

Sir, with regard to the new initiatives and investment that you mentioned, so given that we have started the physical model, and we started to begin a physical presence in the form of stores, and we have the target of establishing more than 200 stores by FY'24, Why do we see a reduction in the expenditure in the new initiatives as of this quarter?

Yashish Dahiya

So first of all, all our physical stores or physical presence are not part of our new initiatives. I think we have clarified this many times. They are part of our core business. And so all those costs are in the core business, all those margins are in the core business. And when we say the core business is profitable that at the adjusted EBITDA level, that implies it includes all those costs of all those stores and all those physical people and everything is included in that. Why the expenditure on the core business down from last quarter? The expenditure is just a function of the revenue, rig

My first question was with regards to the life insurance sector. Today itself it's a very dominant force with almost 20%-odd market share and you guys onboarded LIC five, six months. Are you driving benefits from that partnership now or is it still work-in progress?

Sarbvir Singh

LIC online journey started just last month with us after all the integrations have been completed. The first month, as you can imagine, it's been a good start. We are slowly building the business. We are very optimistic and I think we see a very good opportunity ahead. As you said, LIC is a major player in the business, and I think we will also benefit from that as we go along. So far the traction is not good? I said the traction is very good. We've just started. If you can provide me some sort of mix between new business premium renewal, and B2B or the POSP premium basically, because obviousl

Quick questions. On credit card, I understand we are going to launch co-branded cards or come out with some card offering of our own. Does that get impacted in any shape and form with the recent PPI in regulation with banks loading of those cards with credit?

Naveen Kukreja

Arun, the PPI regulation was impacting the prepaid instrument. When we talked about the cards we have two co-branded credit cards live in the market. So they do not get impacted because they are on the credit card platform not on the PPI platform. And they satisfy the co- branding conditions that RBI has laid out when they came out with a regulation on what is allowed and what is not allowed for a co-brand partner to be doing. In both the cases we work with different banks. So we working with them as per the regulations. So no impact in our plans going forward either I'm assuming? Absolutely,

Two questions from my side. One is the new premium per enquiry, this has gone up by around 15% on a quarter-on-quarter basis. So how should we really think of it? You mentioned that for obvious reasons, motor premium was higher in this quarter. I would believe that motor premiums would be maybe in line or maybe slightly below your average premium. So how should we really think about it, is it something that you were able to grow savings at a faster pace or is it something that you've seen a very similar increase in ticket size across products?

Sarbvir Singh

So first of all, motor is a very small portion of that answer. I think the real answer is that as we just discussed the productivity of our agents is going up. So they are able to convert more leads per agent than they were converting earlier. This is driven again by two or three things; intent of the customer, the technology that we are providing our agents to talk as well as the onboarding, etc., and the third thing is the offline component that we have added, where a person is able to visit the customer in their home or office as they desire. And that is giving us an incremental productivit

I have a couple of questions. I just wanted to understand what will be a quarterly revenue share, let's say how the first quarter would look like and how the fourth quarter would look like because we are a season businesses and this Q4 is a typically a heavy quarter for the insurance industry, so how would Q1, Q2, Q3 and Q4 would look like in terms of as a percentage?

Yashish Dahiya

See, we don't give forward guidance and all that, except for the one I'm giving for Q4, I'm giving some forward guidance, because I think everybody needed it and we also feel fairly confident of it now. But historically, the year has been about 5.5x of the first quarter, but seasonality is reducing for us. So you can make your own judgment call on how it would play out. It varies by vertical also. Typically, what happens is, if you look at industry, because industry is skewed towards savings product, that's why you see much higher seasonality for the industry. In our case, because we have very

First is a data-keeping question. If you can split your premiums on the insurance business between new and renewal? Second, more from a quality perspective, if I just do some numbers on your contribution margins, what it looks like is that the entire benefit has come from the old or rather the digital insurance business where the contribution margins are probably at now 60%-plus. And to some extent that looks like that that is probably in a significant reduction in your ad and promotional spend, that goes into the contribution even though the share of customers coming directly and some of thes

Sarbvir Singh

So the first question, Dipanjan, is that our ad spend is driven by the business and everything that we're doing in each month. So there is no such thing that we have slowed down or speeded up the process. Last year was a COVID year. So April, May were very strong months because of COVID. So obviously, we were very visible and active on television. This quarter is a more normal quarter and we spent as we would in any first quarter of the year. If you're okay, could take this offline with Rasleen, that would be helpful, because our brand spend or our ad spend has not really come down, if anythin

A couple of questions. First is could you just give the revenue for Paisabazaar for the quarter?

Yashish Dahiya

The credit revenue is ₹ 84 crores for the quarter. The distribution like the credit card, etc., would be? We don't go into segment-by-segment, but the leading product out there is unsecured loans and credit cards, and they are both growing well. But we do not give more disclosure than that, we just don't do product level reporting. What we have given is the disbursal growth and credit card growth; disbursals grew by about 135% YoY and number of credit cards issued grew by about 600%-plus YoY. So you can get a sense from that. And the ₹ 84 crores equivalent number for last quarter would be, app

I just had a basic question. Because we've been talking about that seasonality in different quarters. I just wanted to understand Q4 to Q1, we've seen a growth in our renewal revenue, we've seen a growth in our insurance premiums, in the disbursals as well. So what really explains that 6%, 7% decline in the existing revenue, is it some product mix, what explains that decline despite whatever 10%, 12% increase that we've seen in the disbursals, premiums and the renewal revenue also?

Yashish Dahiya

Broadly, if I were to explain to you, the 4% decline that we see in the revenues from Q4 to Q1 would be probably because of about 8% decline in fresh insurance premium compared to Q4 – Which is very expected, right? You're comparing the March quarter with the April, May, June quarter. In the insurance industry, those are not really very comparable quarters. And I think that is it. There is not much mix change, etc., Just seasonality, nothing more than that. If your revenue is the same as the strongest quarter of the year, which is pretty much the same, that is a pretty strong result I would sa

The first one is on slide #3. If we have the year-over-year premiums increasing come 1,594 to 2,430 how much of the growth is explained using new initiatives? And how much is the growth in the core Policybazaar business, if you could help us appreciate that?

Sarbvir Singh

We haven't shared this breakup, but again, you can do the math based on the revenue, right, you can get to some numbers. Obviously, the new initiatives add to the growth and there is growth in the existing business as well. See, ₹ 134 crores revenue there on the new initiatives. And if you take away the credit revenue, there is probably ₹ 290-odd crores of revenue here on the existing businesses. You could perhaps take some kind of a split. But is there material improvement in take rates or is the entire growth in the revenues explained by growth in premiums? The take rate has improved materia

Thank you very much to all of you for all your participation and all your questions. Very heartening to see the participation and look forward to speaking to you in another three months’ time. Thank you for now. Have a good evening. Bye.

Management

Speaking time

Yashish Dahiya

Sarbvir Singh

Moderator

Alok Bansal

Arpit Shah

Nikhil Agrawal

Dhaval

Umang Shah

Naveen Kukreja

Nischint Chawathe

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Opening remarks

Rasleen Kaur

Thank you for joining us today. We have with us Mr. Yashish Dahiya -- Chairman and CEO, PB Fintech; Mr. Alok Bansal -- Executive Vice Chairman and Whole-Time Director of PB Fintech; Mr. Sarbvir Singh – President, Policybazaar; Mr. Naveen Kukreja -- CEO, Paizabazaar; Mr. Mandeep Mehta -- CFO PB Fintech. Now I request Mr. Yashish Dahiya to give us a brief update about the Q1 FY'23 Results.

Yashish Dahiya

Hello, everyone. Before I get into the details on the way forward and the Q1 FY'23 Performance Metrics, I'd like to reiterate some facts about our business. There are four pillars that I believe we stand on. Firstly, a majority of health and life insurance consumers in India do their research on Policybazaar. This leads to a higher persistency for these consumers, because having done their research, they somewhat know what they are purchasing and hence their likelihood of churning is much lower. Second, we have the best conversion engine for digital enquiry and continue to improve it, as demonstrated by the increased premium for enquiry of 32% over the last 12-months. As a third leg, we continue to improve the platform in terms of consumer onboarding, service and claim capability, demonstrated by the CSAT which is at 83%, and the number of unprompted customer messages we receive every day on claim support as well as customer onboarding. And lastly, but not the least, a higher customer

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