PB Fintech shares extended their slide for a fourth straight trading session on Tuesday, hitting a fresh 52-week low as investors priced in concerns over proposed insurance distribution reforms by the Insurance Regulatory and Development Authority of India.
The stock hit ₹1,077 during the session and settled 6.11 per cent lower at ₹1,081, down 6.4 per cent at its worst from Monday's closing price of ₹1,151.30. The slide leaves the shares down 42.9 per cent from ₹1,886.30 on September 23.
The proposed changes to insurance distribution norms have raised concerns over their potential impact on the company's commissions, particularly in health insurance. Kotak Institutional Equities said PB Fintech could face a relatively larger impact from the proposed commission cuts, given its position as a multi-insurer distributor. The brokerage noted that the proposed reductions would affect distribution entities such as corporate agents, banks and PB Fintech more than individual agents.
Commissions on health insurance, a key focus segment for the company, are proposed to be capped at 15 per cent for new policies and 5 per cent for renewals, compared with 20 per cent and 10 per cent respectively for agents.
Kotak noted that IRDAI had acknowledged the industry's focus on sales volumes rather than policy quality, but had not proposed incentives linked to quality parameters. It said PB Fintech could potentially negotiate for such incentives, adding that the company has business moats but will have to navigate a difficult period.
Elara Capital cut its target price on PB Fintech to ₹1,400 from ₹1,990 while maintaining its 'buy' rating. The brokerage lowered its discounted cash flow-based target, factoring in 48 per cent and 35 per cent cuts to its FY28 and FY29 earnings per share estimates. Its FY30 estimated profit after tax of ₹22.9 billion is in line with its earlier FY29 estimate, implying a one-year delay in earnings.
Elara said the proposed changes are already priced into the stock, and identified any relaxation of the proposed health insurance renewal and first-year commission caps as potential upside. Slower growth in fresh premiums, higher customer acquisition costs following a ban on lead generation and slower cost reductions remain key risks.
Sources: The Hindu BusinessLine
The stock hit ₹1,077 during the session and settled 6.11 per cent lower at ₹1,081, down 6.4 per cent at its worst from Monday's closing price of ₹1,151.30. The slide leaves the shares down 42.9 per cent from ₹1,886.30 on September 23.
The proposed changes to insurance distribution norms have raised concerns over their potential impact on the company's commissions, particularly in health insurance. Kotak Institutional Equities said PB Fintech could face a relatively larger impact from the proposed commission cuts, given its position as a multi-insurer distributor. The brokerage noted that the proposed reductions would affect distribution entities such as corporate agents, banks and PB Fintech more than individual agents.
Commissions on health insurance, a key focus segment for the company, are proposed to be capped at 15 per cent for new policies and 5 per cent for renewals, compared with 20 per cent and 10 per cent respectively for agents.
Kotak noted that IRDAI had acknowledged the industry's focus on sales volumes rather than policy quality, but had not proposed incentives linked to quality parameters. It said PB Fintech could potentially negotiate for such incentives, adding that the company has business moats but will have to navigate a difficult period.
Elara Capital cut its target price on PB Fintech to ₹1,400 from ₹1,990 while maintaining its 'buy' rating. The brokerage lowered its discounted cash flow-based target, factoring in 48 per cent and 35 per cent cuts to its FY28 and FY29 earnings per share estimates. Its FY30 estimated profit after tax of ₹22.9 billion is in line with its earlier FY29 estimate, implying a one-year delay in earnings.
Elara said the proposed changes are already priced into the stock, and identified any relaxation of the proposed health insurance renewal and first-year commission caps as potential upside. Slower growth in fresh premiums, higher customer acquisition costs following a ban on lead generation and slower cost reductions remain key risks.
Sources: The Hindu BusinessLine
