POLICYBZRNSEQ2 FY23November 12, 2022

PB Fintech Limited

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123turns

14analyst exchanges

6executives

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Management on call

Yashish Dahiya

CHAIRMAN & CEO, PB FINTECH LIMITED

Alok Bansal

EXECUTIVE VICE CHAIRMAN & WHOLETIME DIRECTOR, PB FINTECH LIMITED

Sarbvir Singh

PRESIDENT, POLICYBAZAAR, PB FINTECH LIMITED

Naveen Kukreja

CEO, PAISABAZAAR, PB FINTECH LIMITED

Mandeep Mehta

GROUP CFO, PB FINTECH LIMITED

Rasleen Kaur

HEAD, CORPORATE STRATEGY

Key numbers — 40 extracted

₹290 crore

consumers research, they know what they are purchasing. Our renewal revenue is now at an ARR of ₹₹290 crores. We have the best conversion engine in the industry and continue to improve our premium for enqu

₹ 1,500

engine in the industry and continue to improve our premium for enquiry which is now greater than ₹ 1,500 per enquiry for the first half of the year which is the highest we have ever achieved. There is co

86%

months to receive more than 10,000 appreciation letters from customers every month and a CSAT of 86%. It is indeed a massive change in the number of appreciations that we are receiving from consumer

105%

partners to settle a higher percentage of claims than they do for any other channels. We grew at 105% year-on-year and our existing business has now been profitable for the last 3 quarters. In the la

₹ 60 crore

appened in the last couple of years. From our existing business, our adjusted EBITDA increased by ₹ 60 crores for the quarter and ₹ 98 crores for the first half of the year. If some of you may recollect in

₹ 98 crore

ars. From our existing business, our adjusted EBITDA increased by ₹ 60 crores for the quarter and ₹ 98 crores for the first half of the year. If some of you may recollect in the last quarter call, I had tri

₹ 150 crore

o explain more from a layman perspective our adjusted EBITDA should keep growing at roughly about ₹ 150 crores every year. As you would appreciate this ₹ 98 crores in one half of the year is very much in l

55%

, the Insurance Marketplace Policybazaar and the Credit Marketplace Piasabazaar grew at 55% year-on-year to ₹ 410 crores. Of this revenue, the credit linked revenue was ₹ 101 crores for the

₹ 410 crore

etplace Policybazaar and the Credit Marketplace Piasabazaar grew at 55% year-on-year to ₹ 410 crores. Of this revenue, the credit linked revenue was ₹ 101 crores for the quarter. For our existing i

₹ 101 crore

sabazaar grew at 55% year-on-year to ₹ 410 crores. Of this revenue, the credit linked revenue was ₹ 101 crores for the quarter. For our existing insurance business, we had an adjusted EBITDA of ₹ 18 crores f

₹ 18 crore

s ₹ 101 crores for the quarter. For our existing insurance business, we had an adjusted EBITDA of ₹ 18 crores for the quarter. For complicated products like Health or Life Insurance, we have been extending

₹ 12,000 crore

ntinues to grow very well and has rebounded well since COVID. We are now at an annual run rate of ₹ 12,000 crores of disbursals and 0.5 million credit cards issued on an annualized basis. Over 31 million custom

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Guidance — 20 items

Yashish Dahiya

opening

“Co-created products like step up card, duet credit cards are gaining traction and as we reported last quarter, we still expect our credit business to be on adjusted basis, EBITDA positive by Q4 of this year.”

Sachin Dixit

“Just one final question on the cash balance, we have just ₹ 5,000 Cr cash that is obviously helping us with the interest income that we are generating, but what is the plan for this going forward?”

Nikhil Agrawal

“I just had a few questions about certain products, so there was credit line product that was mentioned last quarter, is it after the direction that have been issued still going forward as far as the credit line thing is concerned we have not loved to give a credit line without actually having the balance in the instrument, so is that product being continued if there is any color on the product?”

Nikhil Agrawal

“Sir, just one more question about the investments in the new initiatives, so any trajectory on what kind of investments are we going to see in the new initiatives going forward?”

Nikhil Agrawal

“And sir, on the investment that you mentioned you said that it will be lesser than this or so right now this quarter it was ₹ 65 crores in the new initiatives, going forward it will be at this level or lower than that, if my understanding is correct?”

Nikhil Agrawal

“I will just leave with my last question; can you please give some color on how the ESOP will work going forward?”

Management

“So, the number that we have for this year is about I think ₹ 600 crores, but if you look at next year, this number should come down to somewhere between ₹ 300 and ₹ 350 crores and that has continued to come down very drastically post that.”

Yashish Dahiya

“So, as I said, our objective of becoming profitable next year with ₹ 310 crores of ESOP grants imply is that at some point in the very near future that ESOP cost will not be there, so you will obviously see that advantage.”

Sagar Sanghvi

“I have only one question, if we look at the Slide #11 of your presentation, there is a mention of Bima Sugam, so if you can just help us understand what could be the disruption cost by proposed or discussed of Bima Sugam or something and how would you plan to mitigate the same?”

Sagar Sanghvi

“So, you mentioned you will have excess to lot of data layer, so do you plan to enter into KRA business that is KYC registration agency or kind of business as you had a lot of customer data or something like that?”

Risks & concerns — 10 flagged

So, while there has been a general slowdown in the retail protection sales, we delivered 34% growth in health insurance premiums and 29% in life insurance premium's new business.

— Yashish Dahiya

No, I was asking like generally do you have a view on how the term industry is functioning right, it continues to be weak, so do you see H2 being much better than how H1 has been?

— Sachin Dixit

If you look at the second quarter, the industry is probably flat to a little bit decline, so we are obviously growing in that backdrop.

— Yashish Dahiya

So, if my understanding is correct, we partner with the bank and when the person or the customer takes the credit line out it becomes the term loan with the bank, so the risk is with the bank and then it is between the bank and the customer, so we don’t have any impact on this?

— Nikhil Agrawal

We as a company did not kind of bulk under that pressure or whatever you want to call it.

— Management

So, we will continue to do what is right for the company and at the same time we are fairly confident of our core strength of our business and I say that with a lot of conviction because I have seen our operations and how difficult it is to do something like we are doing.

— Management

So, the experience that we are delivering whether it is in terms of post purchase experience whether it is in terms of claims I think that we have big difference and the second thing was that to remember is that we are in the risk business.

— Management

So, the channels which can bring better risk to the insurer will always have a certain advantage and perspective.

— Management

One is customer experience and secondly the risk.

— Management

So, that basically will give you the indication that it will start to decline quite rapidly.

— Management

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Q&A — 14 exchanges

Congratulations on great results, I think the topline you have scored the EBITDA losses, I had a quick question regarding the breakdown of premium if you can help with that between say how much it is POSP and how much is renewal if that is possible?

Yashish Dahiya

So, POSP is ₹ 458 crores for Q2 this year, the non-POSP Policybazaar is ₹ 2026 crores. That is what we disclosed. I already told you both the health and life business grew at approximately 30% on the new side and on the renewals both. And I assume the core business also includes corporate insurance there? Yes, it does. And on the term side of it, which I think continues to look we even now and some of the insurance have been commenting probably H1 and H2 will look at it, you had any views on how that is shaping up for you in terms of the growth side of them? So, the total for premium for term

I just had a few questions about certain products, so there was credit line product that was mentioned last quarter, is it after the direction that have been issued still going forward as far as the credit line thing is concerned we have not loved to give a credit line without actually having the balance in the instrument, so is that product being continued if there is any color on the product?

Management

I think if I understood the question correctly, your question is related to the regulation which came out on credit line when it was linked to TPI was disallowed by the regulators? Yes, right and there was a credit line product that we used to issue till quarter 1, so have we discontinued that product, how are you working around that? We run the product with the bank. There is absolutely no impact on that product, it is a credit line product which works like personal loans with the consumer. If you want to draw out any amount from that credit line it converts into a term loan. There is absolut

I have only one question, if we look at the Slide #11 of your presentation, there is a mention of Bima Sugam, so if you can just help us understand what could be the disruption cost by proposed or discussed of Bima Sugam or something and how would you plan to mitigate the same?

Yashish Dahiya

I think if you make a correlation to the travel business which I used to be in long time ago, we used to have global distribution systems there, the likes of Amadeus, Galileo, Sabre, Worldspan and those were very critical in powering that travel businesses, so if you look at Expedia, the reason Expedia went worldwide and expanded very rapidly was because they essentially had a tieup with Worldspan and Worldspan was giving them all the integrations and everything else. So, to an extent, I see that kind of roles being played by Bima Sugam as an exchange because that would be the UPI moment for t

I think our momentum in the savings business continues, I think in the same way that we have planned, both last year was a very good year for us and the first two quarters have also been very good and I think the best way to think about it is that there are two things that have happened, one is that the premium is growing very rapidly and also there has been a structural shift in terms of the kind of product that we sell. The main product that we sell is the capital guarantee solution which ensures that the capital that the person has invested is safe and they have an upside due to the market,

Adarsh Parasrampuria

And my second question was relating to expenses beyond the contribution line and the ESOPs growth there that you would expect Yashish, anything changing to make that growth or that is going to be inflation linked, you shouldn’t see a lot of very high growth in that part of expense which is beyond the contribution? I think as Yashish said, the objective is very clear, we want to deliver profit and I think we are focused on that. Those cost will increase as low as possible is all I would say. The rest, there is an inflation in the market, there is natural increase in that, but I guess to keep th

I had a few data questions, so one is basically you gave the number for core premium, which is about ₹ 2,026 crores, can you please split it into new and renewal and also to the same numbers for the last year second quarter as well? And the other question I had was in the previous quarter you used to give this number of credited related revenues, so you split your revenues into credit and insurance related, so if you could do this for this quarter as well and give it for the second quarter last year as well and I just wanted to understand the progress on basically on contracts with your partne

Yashish Dahiya

Remind me if I missed any of your questions, so first thing I picked up was you wanted to know what is our new versus renewal split, it stays very similar to how it has been in the past, there is no real change in that. It is roughly half and half, so about 50% is new, about 50% is renewal and ₹ 101 crores of our core revenue was credit linked, so you had a total core revenue of ₹ 410 of which ₹ 101 crores is credit linked and the rest would be all insurance linked. The third one was the progress on renewal contracts? Renewal contracts you mean in terms of the life insurance receiving more ren

I have just one question, I noticed that your core insurance revenue, the take rates have gone up on a quarter-on-quarter basis, can you help me understand how has that gone up?

Yashish Dahiya

As we said one of the products, it is basically a product mix change and one of the products, the take rates that increased. So, I think it is two things, one is that our life and health businesses are a greater proportion of our overall business than we were in the previous year and the second thing is that we just discussed in one of our businesses in life, the take rates have increased year-on-year. And just one quick clarification, you have talked about observing a ₹ 5 crores loss by the non- insurance business, this ₹ 5 crores pertains to Paisabazaar, I am just clarifying? It pertains to

Last quarter you mentioned that life and health was around 75% of the premium, what would be the ratio like in this quarter?

Management

Slightly higher actually. If I look at it is getting towards 77%, 78%. Contribution of corporate business in the first half would be like how much very approximately? We count contribution on the money we make. I am sorry share of premium? That I do not think we disclose that. But should be similar to what was there in the previous year or it kind of goes up, goes down? Similar maybe it is a little lower. If you look year-on-year it is about flat there is no change in that. My second question pertains to ESOPs now I was just trying to understand what is the exercise period for the ESOP once th

My question was regarding the point of sale premium of around 458 crores that you said for this quarter, so I remember this was the same more or less the same number in Q4 of last year FY22, so we are not growing this business year business too much now it is more or less stable, I just wanted to understand that has the objective been achieved what we started to do through this point of sale business if you could share some of the competitive strategies around this business and whether we have achieve this target and for now we are focusing more on the premium on the coal business where obviou

Management

Ansuman I will share what is possible to share on a public call I think the first thing that we were very clear about was that we wanted to be leaders in this business. If you remember we achieve that in January of this year. So, within a few months of launch we became the number one company that we have maintained. The second thing that we want to achieve is that we want to build a sustainable business and to us building a sustainable business means that our agent partners’ income must go up by working with Policybazaar. We are on that path. One of the main ways of doing that is to ensure tha

So, just two questions first is on the sort of use of cash as you move towards profitability I know you sort of responded that first you want to reach the target before thinking about utilization, but just if you could give some perspective of initial thoughts that would be useful, so the background here is on inorganic we have always been very cautious from a validation standpoint and sort of chose to build versus purchase buy, just some perspective around use of cash would be useful and the second question is I think this was whose question relating to breakup between credit and non credit r

Management

First of all, I will share something with you I think somebody told me the markets react very quickly. So, I think I had internally thought that this question of what will you do with cash will become a very important question or become the main question for us in about April 2024 because we would have delivered a year of profits and that is when people would say okay now that is done and we do not have that question anymore we would like to know what you will do with the cash, but you guys react too quickly. You have already assumed we have made profit for next year and you have started askin

Just wanted to understand what was the kind of contribution margin you all are targeting in the new initiatives because right now if I see the contribution margins in the core business we are around 45%, but if I see the new business initiatives we would think the contribution margin positive by let us say FY24 end?

Management

Yes absolutely by FY24 end new businesses will be contribution positive. And if I heard it correctly you have said FY24 PAT positive even after ESOP cost? Yes after ESOP cost. See it is a very straight forward thing. We will be adjusted EBITDA positive by the last quarter of this year. So, already our interest cost covers our adjusted EBITDA loss already. Now, what do we have to do next year our adjusted EBITDA would have broken even because you can clearly see PaisaBazaar does it that that way and Policybazaar is making more, the core business is making about whatever approximately 200 crores

Just one question from my side so you mentioned the number of employees in the offline channel it is about 1,000 could you share the similar numbers like for the POSP agents and the other advisors that we have?

Management

I do not think we want to go into this level of details. We are more than 100,000 POSP agents now, but it is really not a relevant number because what is relevant is how many of them are doing how much.

I just wanted to talk about the Bima Sugam initiative little bit more detail the way I look at it I know you guys mentioned that it could be the UPI movement, but on the flip side UPI moment has led a lot of payment companies to just do a lot of volume, but little revenue and the regulator has talked about reducing a premium while transacting through Bima Sugam and making it a marketplace, so I am just curious from a market perspective, from a market opportunity perspective how this could impact the business?

Management

I think as I said we see it there were two things right. I think our positive perspective it would be a GDS a distribution system, what you speak about is in my opinion a very remote possibility. Of course, everybody has their opinion on this thing right now, but I do not think that as a conclusion the payment ecosystem as a conclusion as in let us say three players having 90% of the markets I do not think that is a conclusion that the regulator is going to prefer you know you can think about what that would do to agency, what that would do to of course there are three, four players in the mar

Just one quick question our ESOP expense for FY23 can you give some estimation I think H1 we have already done 340 crores, so could it surpass 550 crores or even higher?

Management

Basically as we have seen that charges for these grants started from October last year. The first 6 months of this year was the half of the first-year charge which is roughly 23% of total. The second half is going to be the half of the 26%, so 13% of the total. So, there may be some new grants, but those are relatively small numbers which will happen, but you can just see first half 23%, second half 13% in that ratio 23 versus 13. Just to give you an example in this quarter we have had ESOP expenses of about 173 crores. In the next quarter this might be just a shade above 100 crores. So, that

Thank you very much everyone for taking time out to attend our call. We really appreciate it and thank you all for your questions. I hope we were able to answer most of them adequately. We will improve upon this as time goes. Thank you bye now, have a great day.

Management

Ladies and gentlemen that concludes this conference. Thank you for joining us and you may now disconnect your lines.

Speaking time

Management

Yashish Dahiya

Moderator

Nikhil Agrawal

Nischint Chawathe

Sachin Dixit

Arpit Shah

Sagar Sanghvi

Prateek Poddar

Ansuman Deb

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Opening remarks

Yashish Dahiya

Hi everyone. I will start by reiterating few facts about our business once more. A majority of health and life insurance consumers in India do their research on Policybazaar. This leads to a higher persistency owing to the fact that when consumers research, they know what they are purchasing. Our renewal revenue is now at an ARR of ₹₹290 crores. We have the best conversion engine in the industry and continue to improve our premium for enquiry which is now greater than ₹ 1,500 per enquiry for the first half of the year which is the highest we have ever achieved. There is continuous improvement in customer onboarding, service and claim support which has let us in the last few months to receive more than 10,000 appreciation letters from customers every month and a CSAT of 86%. It is indeed a massive change in the number of appreciations that we are receiving from consumers. Higher customer disclosure along with strong data analytics and fraud detection mechanisms that we have developed ov

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