POLICYBZR — earnings call

The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.

Prepared remarks

FINTECH LIMITED · MR. MANDEEP MEHTA - GROUP CFO, PB FINTECH

MR. ALOK BANSAL - EXECUTIVE VICE CHAIRMAN & WHOLETIME DIRECTOR, PB FINTECH LIMITED MR. SARBVIR SINGH - PRESIDENT, POLICYBAZAAR, PB

MR. NAVEEN KUKREJA - CEO, PAISABAZAAR, PB

MR. MANDEEP MEHTA - GROUP CFO, PB FINTECH

LIMITED · Management

MS. RASLEEN KAUR - HEAD, CORPORATE STRATEGY & INVESTOR RELATIONS PB Fintech Limited November 07, 2022

Moderator · Conference Operator

Thank you.

We have the next question from the line of Sagar Sanghvi from ADD Capital.

Please go ahead.

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?

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 PB Fintech Limited November 07, 2022 exchange because that would be the UPI moment for the industry and that would make it help other distributors grow, whatever products they were selling, whether they were selling motor or health or term, so I think it will be a very positive move for the industry overall and for us per se as well because it would get us access to a lot of data layers which we may or may not have access to today because the Bima Sugam will have those.

So, I think it is a fairly positive move for us.

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?

Yashish Dahiya

I will tell you; I am not trying to be cagey about it, there is very little we can say because we don’t have so much clarity yet, in fact, we have met with the regulator and we asked for clarity also.

At this point, that was in the distribution department and there didn’t exist so much clarity in terms of us starting to get to think about it from an operational perspective that what does it mean, but that is the reality of the situation right now, but I guess as it evolves, right now there is a lot of conversation in the media, but that is not what is flowing operationally to us.

So, we have to wait it out and see how it goes, but to me the analogy is the GDS in the travel businesses which I used to run one of them which was e-bookers, so I understand that analogy very well and if you think about it, flights as a business has really moved under GDS, but hotels still stays somewhat out of the GDSS, packages stays out of the GDS, so I think it takes time.

So, you get the story right, it doesn’t suddenly magically just happen in one month.

Sagar Sanghvi

And one more related question to your financial, so you are talking of about ₹ 1,000 crores of PAT by FY26-27, so that would also help throw a peak cash flow of about ₹ 1,200 odd crores a year post that and you are already sitting on a pretty large cash balance, do you plan to enter insurance manufacturing, selling of insurance?

Yashish Dahiya

No, we have no such plan, in fact to be brutally honest, we don’t have any clue what we will do with this roughly ₹ 6,000-₹ 6,500 crores of cash that we will have at that stage and that is the reality and I think we will be a in a position.

See right now, the question to ask is if this guy will become profitable. if you are actually going to be profitable.

That is step one.

I think once we do that the next question is going to be okay guys, what do you want to do with this cash that you have and already you are profitable, you are cash flow positive and you do not really want to make acquisitions, what do you want to do with this cash.

Let us get to that point first, right, we are in class one right now, let us get to class 4 before we take the exam of class 4, so I think this is the time for us to be heads down and executing rather than thinking too far into the future about what we are going to do with this beautiful amount of cash that will be lying with us, but yes, of course we will not waste it, so we will see, maybe we will return it to you guys (I don’t know whether you are investor or an analyst) PB Fintech Limited November 07, 2022

Sagar Sanghvi

Investor and analyst, so that is helpful and great set of execution in this quarter.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Adarsh Parasrampuria from CLSA.

Please go ahead.

Adarsh Parasrampuria

My question was relating to the savings business momentum; this year was supposed to be a big year for savings?

Moderator · Conference Operator

Thank you.

We have the next question from the line of Subramanian Iyer from Morgan Stanley.

Please go ahead.

Subramanian Iyer

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 partners on getting renewal revenues in the sense that you were in that aggregator previously and you were not entitled to renewal revenue, so how is the progress on that?

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.

Subramanian Iyer

The third one was the progress on renewal contracts?

Yashish Dahiya

Renewal contracts you mean in terms of the life insurance receiving more renewals in the future etc., yes, there are conversations going on there, but nothing material to report in terms of massive changes or anything, but on Paisabazaar there is a big renewal change, there is a positive surprise for us because Paisabazaar historically never had renewal and it is very heartening to note one thing, if you look at it carefully Paisabazaar now has trail revenue that is at the same level as Policybazaar was in 2018.

So, you can see that and they are actually growing much faster than Policybazaar trail revenues ever grew.

So, there is an expectation and Naveen, correct me if I am wrong, our expectation is we would be doing about $7,00,000 PB Fintech Limited November 07, 2022 by March per month.

So, if that happens they should be almost in my opinion, if I were to look forward there is almost $10 million of renewal revenue next year because there is growth and there is multiply by 12, etc., which is a huge positive surprise.

So if you asked us what would be Paisabazaar renewal revenue sitting back in Nov 2021 about when we were going public, I don’t think anybody had any expectation of that.

Moderator · Conference Operator

Thank you.

We have our next question from the line of Prateek Poddar from Nippon India Mutual Fund.

Please go ahead.

Prateek Poddar

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.

Moderator · Conference Operator

We will take the next question from Nischint Chawathe from Kotak.

Please go ahead.

Nischint Chawathe

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

Moderator · Conference Operator

Thank you.

We have the next question from the line of Ansuman Deb from ICICI Securities.

Please go ahead.

Ansuman Deb

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 obviously our margins are really high and we are also going very good, if you can just underline your POS strategy in line with the competition landscape?

Moderator · Conference Operator

Thank you.

We have our next question from the line of Dhaval from DSP.

Please go ahead.

Dhaval

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 PB Fintech Limited November 07, 2022 breakup between credit and non credit revenue for same quarter last year those are two questions?

Moderator · Conference Operator

Thank you.

We have the next question from the line of Arpit Shah from Stallion Asset.

Please go ahead.

Arpit Shah

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?

Moderator · Conference Operator

Thank you.

We have the next question from the line of Devjyot from Citi Group.

Please go ahead.

Devjyot

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?

Moderator · Conference Operator

Thank you.

We have a next question from the line of Rahul from Lionrock Capital.

Please go ahead.

Rahul

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?

Moderator · Conference Operator

Thank you.

We will take our last question from the line of Rishi Jhunjhunwala from IIFL Institutional Equities.

Please go ahead.

Rishi Jhunjhunwala

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?

PB Fintech Limited November 07, 2022

Moderator · Conference Operator

Thank you.

I would now like to hand over the conference to Mr. Yashish Dahiya for closing comments.

Over to you, sir.

Yashish Dahiya

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.

Questions and answers

Moderator · Conference Operator

Thank you.

We will now begin the question-and-answer session.

We have the first question from the line of Sachin Dixit from JM Financial.

Please go ahead.

PB Fintech Limited November 07, 2022

Sachin Dixit

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.

Sachin Dixit

And I assume the core business also includes corporate insurance there?

Yashish Dahiya

Yes, it does.

Sachin Dixit

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?

Yashish Dahiya

So, the total for premium for term insurance grew at 57%, but the fresh premium grew at roughly about 20% for the quarter.

Sachin Dixit

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?

Yashish Dahiya

Yes, there is definitely a better growth now than the last quarter.

If I remember correctly, the last quarter was lesser than this, it was about 60% of this growth rate and this growth rate is at what we mentioned right now and for the industry there were swings towards certain players etc. Increasingly, those are settling down, but we don’t comment too much on individual players who get market share, but on the whole we think the industry has been about flat.

For the first half, the industry has declined a little bit.

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.

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?

Yashish Dahiya

I think once we get profitable, once we deliver ₹ 100 crores of profit, we will also discuss what we do with this cash.

I think it is too early.

Let us get there, let us deliver at least the first ₹ 100 crores of profit before we start concluding that this cash will never be utilized.

Yes, so basically, our cash receivable will not go down from here.

It just will always stay about the same number, so we are not losing cash.

That is all and that is what we just saw, so last quarter also we have not lost cash.

PB Fintech Limited November 07, 2022

Moderator · Conference Operator

Thank you.

We have the next question from the line of Nikhil Agrawal from VT Capital.

Please go ahead.

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?