PolicyBazaar hits over 5-month high; surges 30% thus far in February

Shares of PB Fintech, the parent company of Policybazaar, hit an over five-month high of Rs 559, as they rallied 7 per cent on the BSE in Friday’s intra-day trade amid heavy volumes. The stock of fintech company was trading at its highest level since September 13, 2022.

Policybazaar quoted higher for the fifth straight day, surging 15 per cent during the period. In comparison, the S&P BSE Sensex was down 2 per cent. Thus far in the month of February, the stock has soared 30 per cent on expectation of the company will report a profit after tax (PAT) positive in FY24 and generate a positive cash flow of around Rs 400 crore. Meanwhile, from February 1, the stock has zoomed 39 per cent from a level of Rs 402.

Policybazaar and Paisabazaar, which are jointly classified as existing businesses, are the company’s largest marketplaces for Insurance and Credit Products. These contributed to almost all of the company’s revenues till FY21. In FY22, the company expanded into new areas and geographies.

PB Fintech’s revenue in the first nine months (April to December) of FY23 was 5.2 times to revenue in the same period four years ago, which was 2019. The revenue grew at 91 per cent year-on-year (YoY), and existing business has now been profitable for four straight quarters.

For the quarter ended December (Q3FY23), the company’s revenue grew to Rs 610 crore, up 66 per cent YoY, while the PAT losses have reduced to just under a third of what they were, which were Rs 298 crore, they’re down to about Rs 87 crore during the quarter.

The growth in exiting business has been driven primarily by a higher pace of revenue growth as costs have grown at the same pace. Overall, the company expects adjusted EBITDA to turn positive in current quarter (Q4FY23).

Further, renewal revenue is expected to reach around Rs 450 crore in FY24. The renewal rate on the renewal business stands at 103 per cent, while the renewal rate on the fresh business stands at 70-75 per cent, which will continue to drive revenue. PB Fintech expects PAT of Rs 1,000 crore by FY27, driven by a higher contribution from the renewal business and moderation in losses in the new business (currently at around Rs 200 crore), Motilal Oswal Financial Services (MOFSL) said in management meet update.

Overall, PB Fintech would be among the Top Decile with life insurers in terms of several parameters such as combined operating ratio, Pay-out/Pay-in ratio and claims ratio. Further, for life insurers, the claims ratio for the book generated by PB Fintech is better compared to other channels, thereby offering a superior proposition for insurers as well. The management also noted that the claims settlement rate for PB Fintech is around 10 per cent higher than the average, MOFSL said.

Analysts at JM Financial reiterate ‘BUY’ rating on PB Fintech while upgrading December, 2023 target price to Rs 950 (Rs 910 earlier) and expect higher conviction on profitability and beneficial resolution of regulatory uncertainties to enable greater strength in this scrip that should only get further boost in the seasonally strong Q4.

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Technical View

Bias: Positive

Target: Rs 160

Resistance: Rs 198

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As per the weekly chart, the near-term bias for the stock is likely to remain positive as long as the stock sustains above Rs 540. Similarly, the major support on the daily chart is placed at Rs 503 – which is the 200-DMA (Daily Moving Average).

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On the upside, the stock could test Rs 600 on an immediate basis, and thereafter extend the rally towards Rs 680 level.

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(With inputs from Rex Cano)