At close of trading Monday, PB Fintech had a market capitalisation of $9.8 billion. Its stock price has crossed Rs 1,800 — closed 8% higher at 1,819.90 on the BSE Monday — compared with around Rs 1,000 six months back.
A strong financial performance, with two quarters of net profit, steady revenue growth and expansion in new insurance premium collection business, is making the Gurugram-based company an attractive investment option.
Returns on investments in new biz
In the June quarter, the company crossed the Rs 1,000 crore quarterly revenue mark and reported a net profit of Rs 60 crore.“Our initial investments in multiple new business lines have started to show some healthy returns; our losses in the agent business and corporate business have started to go down which is working in our favour,” Policybazaar chief executive Sarbvir Singh said.The insurance marketplace, which was focused on building a direct-to-consumer online business all these years, now has a network of 200,000 agents, out of which 60,000 are active agents.Singh said while the persistency in premium payments is going up, growth in fresh business is building a strong pipeline for the future.
The company reported an annual revenue run rate of Rs 559 crore for its renewal business, compared with Rs 418 crore last year.
Its June quarter presentation showed that new insurance premiums grew 78% year on year. Insurance collections from new business lines grew three times in the last three years.
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Going offline
After Policybazaar became an insurance broker in 2021, it invested in building three new business lines: POSP (agent-led point-of-sales person) business, corporate insurance and international business in the UAE.
Along with its offline sales capabilities in the last two to three years, it has built a regional calling capability as well, to cater to its consumers in their regional languages.
Currently the company runs around 100 physical offices from where its employees can visit prospective customers, show them the best insurance policies suited for their needs and also assist them in claim settlements.
Around 25% of its new life and health business fulfilment is coming through this network.
“Insurance in India is still a very physical-led process, and insurance marketplaces are investing heavily in building a physical presence across the country, which is showing results in the bottom line and investors are also finding it attractive,” the founder of an insurance company said on the condition of anonymity.
Benefits of scale
On the corporate insurance side, Policybazaar has scaled up its operations quickly. Currently the company caters to around 30,000 clients for its employer-employee and business insurance products.
“We are building expertise in a wide range of insurance products in the corporate space. I can see that Indian businesses are also waking up to the different risk factors and looking at how insurance can protect them. We are using technology to solve that and our brand to sell better,” said Singh.
Interestingly, a bunch of startups attempted to grab a share of the growing employer-employee insurance sector in the country, but have tasted limited success.
According to a senior insurance industry executive, most of the startups are seeing the cost for acquisition of corporate clients very high, prohibitive for early-stage players.
“Large brands have an advantage in terms of negotiation heft and also in their ability to get access to the large clients. This segment is heating up with InsuranceDekho entering the space too,” the executive added.
Profit elusive
While the new initiatives as a business segment is growing well, it is not a profitable business yet for the insurance distributor though losses have come down.
The industry executive quoted earlier pointed out that given the massive investments in scaling up physical operations and agent network needed in a highly competitive environment, there will be challenges in terms of profitability.
The current plan for the Policybazaar management is to be able to break even in the new initiatives business in the next few years and the leadership is ready to pump in the extra cash needed to stabilise this business in the long run.
