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PB Fintech Ltd
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A very warm welcome to PB Fintech Limited Earnings Call for Quarter 1 Financial Year 2023-2024. We have today Yashish Dahiya, Chairman and Group CEO, PB Fintech; Alok Bansal, Chief Executive Vice Chairman, PB Fintech; Sarbvir Singh, Joint Group CEO, PB Fintech; Naveen Kukreja, Co-Founder and CEO, Paisabazaar; Mandeep Mehta, Group CFO, PB Fintech.Now I hand over the call to Mr. Yashish Dahiya.
Thanks very much, Rasleen. A very good evening or morning, wherever you're joining us from. Policybazaar and Paisabazaar, which are jointly classified as our core online businesses, both India's leading marketplaces for insurance credit. For the last 5 quarters, adjusted EBITDA has kept on consistently improving by an annual run rate of about INR 200 crores. It's actually a little more than that. And if you recollect about 4, 5 quarters ago, I had clarified that this would keep happening, we would keep increasing by about INR 150 crores a year. This is like -- come out to be slightly higher, just explaining.Q4 is traditionally the strongest quarter. And we've never had a situation where our Q1 has caught up with Q4, but this is the first time when Q4 has beaten -- sorry, Q1 has beaten Q4. And out of the INR 516 crores of revenue that the core business made, credit linked revenue is INR 134 crores. So just to put in perspective, even the insurance business alone is flat over Q4, which those who follow the insurance industry would appreciate does not usually happen.We're also very pleased that our core engines of value and our prime focus, health and term grew at approximately 40%. I'm very glad that after almost a period of 2 years, these primary protection engines have started to grow. And month-on-month, we have seen increasing growth. So, very pleased about that.Our total insurance premium for the quarter was INR 3,000 crores -- INR 3,011 crores. Savings has been subdued, just wanted to mention that, over the last quarter and over the last year. Our renewal or trail revenue as at ARR is now INR 418 crores, which is up from INR 273 crores at the same quarter last year. Just to put that in perspective, again, that's about a delta of INR 145 crores, and most of this comes at 85% margin. So this is a significant source of profit growth. And that is where if you look at the INR 200 crores and you look at this, it's all starts to kind of make sense.Our consolidated adjusted EBITDA was a positive INR 23 crores for Q1, an improvement from minus INR 66 crores the same quarter last year. That's a delta of INR 89 crores for 1 quarter. The core online business adjusted EBITDA increased by INR 64 crores. Our CSAT continues to be at 88%. It's actually 88.4%, and it was in the last quarter was 87.9%, but I think let's just stay with 88% for now and it's doing quite okay.Credit business continues to grow well. We now are at an annualized run rate of INR 16,000 crores, and it's been EBITDA positive for -- since December '22. I think the Naveen just got confused whether we are in '23 or '24 already, but that's fine. It happens. So INR 16,000 crores disbursal at 5.8 lakh credit card issuance on an annualized basis. This is on July '23 basis. About 36.9 million consumers who have accessed the credit score platform. 75% of cards issued and 44% of unsecured lending is now happening end-to-end digital. This is a change, and that's what's helping Paisabazaar continuously improve its margins. 75% of disbursals are from existing customers, which is also demonstrating good repeat behavior. The trail revenue is now at 14% of the total credit business revenue.Now, new initiatives. PB Partner, which is the agent aggregator platform, continues to lead the market in scale and efficiency of operations. We have made some changes in focusing towards higher quality advisers. We are operational in 15,400 pin codes across the country, covering 80% of the pin codes. And for those of you who may have seen the numbers and got slightly worried, just don't worry, we stay totally convinced and focused on this part of the business and totally committed to win in it.Our UAE business has grown 2.6x year-on-year. So we've become more confident than we were when I reported to you 3 months ago about delivering the first full year of being back positive this year.I'm happy to take questions now. Thank you.
[Operator Instructions] Hi, Srinath, please ask you question.
Yashish, just wanted to understand from a contribution perspective, our renewals ARRs have been growing faster than the top line. And so as this mix change happen, one would assume that contribution margins would start going north. So I wanted to understand what are the moving parts in contribution? How sticky is the pricing and performance marketing? What has been the growth in performance marketing, both in Paisa and Policy? And how do you see the paths to contributions margins going north towards maybe to 47% or 48% over a period of time? If you could just help us out with that, that would be helpful.
Sure. So let me just take the core business. But a second, let's leave out the new initiative because there are way too many moving parts there. So talking about the core businesses, our total acquisition plus brand spend year-on-year has increased from about INR 152 crores last year Q1 to INR 169 crores in the Q1 this year. That's about an increase of 11%.Now with this, what I'm also clarifying is that INR 159 crores of the acquisition and brand spend that you see last year would have been on account of new initiatives. And this year, that's about INR 126 crores. So, let's again part that aside. So it's been about an 11% increase in the acquisition marketing cost. And overall, you've seen that the revenue has grown by about 32%. So there's obviously been some efficiency gain on this front.As far as the operating costs are concerned, which is the contact center, et cetera, that has stayed flat with respect to revenue. So when I look at the core business, there is -- it's pretty much the same. So that percentage has not changed. But on the marketing side, there's been further efficiency, which has been gained. The renewals have, of course, kept increasing. As I explained, the renewal run rate this quarter at an ARR basis was about INR 418 crores and last year same quarter was INR 273 crores. So you were seeing somewhere around, whatever, 40%-ish growth in that. And that is the same. So you will see it across the board, which obviously helps us have better margins every year.Yes, that's true. And nothing changes in that. So the renewal growth rate is a very steady growth rate over the previous year. And of course, calculating it is complicated because sometimes they are multiyear policies, et cetera, et cetera. But at the heart of it, for our core businesses renewal on renewal is between 95% to 100% on a premium basis and we continue to have higher renewal rates than the rest of the industry. So feel good about all of that. I don't know if I've answered the question, but...
Just a quick follow-up on that. So if renewals have been doing well and our performance marketing cost has been growing slower, so how does one reconcile the fact that year-on-year contribution percentage -- contribution margin expanded just 0.3% in the core business? Is Paisabazaar in the mix got to do with something in this? Just finding it difficult. So one would assume that if ARRs of renewals are growing this fast and some of the direct costs are cooling off, that contribution margins would actually move northwards.
See, if you look at the insurance business, the renewals is about somewhere between 20%, 25% for the total. And you're right, that comes at almost 55% contribution margin compared to the new business. But since it's a pretty small percentage in that, percentage improves, but it takes time. Every year, you'll see that it's reduced by a few percentage points. So obviously, if it improved by, say, roughly 4, 5 percentage points in a year, the impact will be 2%, 3% out of it.So yes, that is definitely contributing. And then apart from that, you do have efficiency which are coming because of efficiency on marketing and the whole revenue per need or revenue per inquiry per.
No, it's moved from about 42% to about 45%. That's a 3% delta. I don't think our renewal revenue would have moved by 3% debt on the overall revenue piece. So -- and so yes, I think what Alok is saying is these are steady changes. They don't have a dramatic change. I think we gave some odd guidance on this, that over a 4-, 5-year period, you should see 5% to 10% delta coming because of these factors. But it's a slow move. And you're seeing 3% of it show up within a year, right? 3 percentage points is very significant in that.Yes, that's across both brands, Policy and Paisa.
Got it. Got it. Congratulations that on the -- the quarter-on-quarter numbers in the core business have surely been a pleasant surprise.
Hi, Pujan. Please ask your question.
Just one of the bookkeeping question would be, if we look at the segregation of our revenue, we have split it into many verticals. So there are a few verticals like insurance commission, then outsourcing services, and third is online marketing and consulting, which is a significant impact on -- like have a significant share of our revenue. So I just wanted to know what is included in each of these 3 things.Firstly, I am glad to know that the insurance commission, I understand very well. But I just wanted to know on the outsourcing services and online marketing and consulting. So what type of services we provide and how we earn the revenue and how we have been like -- if we are like -- has it been annuity stream revenue or like it's been a lumpy thing? Just wanted to know that, sir.
Sure. I will clarify one thing, which is actually quite material, and you should have some clarification on that, which is the advertising and promotion expenses. I'm just breaking this out so that everybody can see it very clearly. It is noted down for your interest. So of the INR 456 crores of total advertising and promotion expenses that you see in March 31 quarter, INR 298 crore or almost INR 300 crores was towards new initiatives, right? And INR 158 crores was towards core business.In the current INR 198 crores of total advertising and promotion expenses, only INR 34 crores is towards new initiatives and INR 164 crores is towards core business. So what I wanted to explain was -- and if you go back to last year, of the INR 289 crores in the same quarter of advertising and marketing expenses as per the statutory results, INR 146 crores was toward new initiatives and INR 143 crores was towards core business.Now once more, I say, statutory results are statutory results. Eventually, we have given a management view of things. They will both consolidate at the same level. But I think this clarity was much needed because there is a classification change in some of the advertising and marketing expenses, which were being undertaken for new initiatives. And that change is essentially appearing in what we know as other expenses.
So to give you an example, year-on-year, if the new initiatives, marketing and advertising promotion costs move from INR 146 crores to INR 34 crores, then clearly, this -- there is about INR 90 crores of this or INR 80 crores of this, which has moved from here into other expenses. I would leave it at that. Other than that, quite honestly, maybe Mandeep gets into it, I actually don't even get into what these stack level things are as long as the consolidated same level with the management.
Sir, my question was would not be on the advertisement expenses. I am talking about this specifically on the revenue segmentation, what we have been presenting in the annual reports. And we have also presented in the DRHP. So if you look...
This is Mandeep. So your question is regarding the segmentation of revenue. So if you look at our annual accounts, the revenue is essentially split into insurance and noninsurance kind of revenue. And within insurance, you will see commissions, rewards and outsourcing revenue that comes to us in an insurance segment. Noninsurance segment is largely for credit-related revenue, that's basically Paisabazaar revenue. And it used to include all advertisement and marketing that we were able to garner in Paisabazaar as well. So that's the primary breakup of the segments of revenue that we have in our annual reports.
Yes, got it, sir. But one of the things is if we are looking for the outsourcing services, what are the specific services we provide so that we get that specific revenue generated via outsourcing. So what is the specific...
We do not get into that level of clarification, please.
Okay. Okay. And my second question would be -- just a bookkeeping would be, if you look at the 14 -- Page #14, so revenue run rate is showing at INR 340 crores ARR. And while somewhere other way I look at it, it is showing at INR 418 crores. So renewal rate is 418...
So the INR 418 crores number that you see is a total ARR and INR 340 crores is related to the specific business, and we will see a balancing number in the related part of the presentation as well.
Next question. Sachin, please ask your question.
This is Sachin. Quickly, I mean, on the INR 1,000 crores PAT guidance that we have had for some time now, right? So I wanted to check your confidence level there. It looks like its easily achievable now. So do you feel that, that number is -- can be preponed, can be increased? Or how does your confidence level on that look right now?
It's the same, nothing has changed there. Everything is the same. Nothing in our mind has changed. Only for this year, we are a little more confident because -- yes, that's all. But I think as far as '26-'27 guidance is concerned, we are just as confident as we were. Nothing has changed in our business dramatically that makes us think more positively or less positively about the future, about the medium [indiscernible].
Sure, sir. Another question on the corporate insurance piece now. This is more like a housekeeping question. That segment used to appear earlier, now we do not see it in the presentations anymore. Are you like tuning it down? How...
No, nothing of that sort. It's INR 222 crores of premium came from the corporate business last quarter. Nothing of that sort. But it's just -- we didn't have any special to say, so we just did say it, but otherwise, yes, that's it.
Understood. And what will be the premium from PB Partners business, if we can ask that?
So I think the total between PB Partners, corporate and Dubai is about INR 750 crores. And INR 220 crores is corporate, INR 100 crores-plus is Dubai -- sorry, it's INR 713 crores exactly, INR 220 crores which is corporate and rest is between PB Partners and Dubai.
Understood. It looks like that is PB Partners has declined very, very sharply. Is that the reading that you are getting?
No, no. I think if you look at it from Q4 into Q1, it has declined. And that is expected -- for Q1, it is roughly at the same level on the overall business. But on the -- as I think it was said in the opening remarks, the nature of the business has changed quite dramatically. So business coming from retail agents is up 90% year-on-year, whereas retail that was coming -- business that was coming from larger agents has gone down significantly. So it's a mix shift between the -- in the business, which makes the overall business look flat, but within that is a very steep increase in the retail business.
Sure. And I think the reason for this mix shift is that you find the retail business to be more sticky or sustainable?
Exactly. It's more sticky, it's more sustainable, and it comes at better economics. But it's much harder to do also, right? That's why it's taken us time to get to this point.
Fair enough. Just one final question, if I can squeeze in. The CM for new core business, if I try to sort of triangulate that basis, the contribution margin that you've been hearing, it comes down somewhere around 15% to 20% range. Am I reading that right?
So I would -- usually -- so we haven't done this. We could track it. But the point is, usually, I would ask you to desist from focusing on new business margin because it doesn't make sense. If health grows faster than other categories, you will see our margin decline because health on new business is a 0 margin category. If you appreciate what I see, I'm saying it because obviously it's a high NPV category. So I wouldn't go too much into new business margin and renewal margin.Overall, there is a business margin, which keeps improving as renewals keep growing. And eventually, the way we look at it internally is an NPV way. So we don't look at these businesses from what is the new -- in fact, let me put it very simply. In our internal reviews, I desist our team from looking at new business margins because sometimes makes wrong decisions because as you can imagine, whenever we review health, there would be a sort of -- sometimes a desire felt of being positive margin on new business. And that actually is not a very healthy thing to do because, obviously, the NPV is way, way higher. And I would rather that we were at 15%, 20% negative margin on the first year, but we're growing much faster.But -- so you appreciate what I'm saying, right? So I think the business mix decides the margins quite a bit. But on the whole, we don't -- we feel good about our margins on the core business. Nothing has changed. Everything seems to be on track.The only thing happened this year is our core protection businesses have grown faster, and I'm quite happy about that part.
Madhukar, please ask the next question.
Congratulations on a good set of numbers. Sir, one data keeping question. Can you share -- actually 2, one, your credit revenues, and second, your renewal premium number. And third, your total premium growth seems to me a little bit on the lower side at 24% growth. Is it -- obviously, part of it is because PoSP has not grown that much. And -- but even if I exclude that, it's probably at about 25%, if I'm not wrong. So your comments around that will be helpful.
I will leave to Sarbvir to comment very specifically, but I will give you the base data so you have it. First of all, Paisabazaar -- credit revenue. Let's call it credit revenue, let's not get confused by Paisabazaar revenue or Policybazaar revenue. Our credit revenue is INR 134 crores for the quarter. Leaving that aside, you're absolutely right. On PoSP in terms of premiums, there was a minus 6%, it's not significant, but it's minus 6%. Please appreciate this is a business which we can grow very rapidly and control, and we'll keep doing things as we progress. There's been a big shift in quality.Also the savings business did not grow. So if you really think about it, savings was a little below last year same quarter. And that was a big part of the business. So, savings was almost as big -- new savings alone was almost as big as health and term or even bigger at times. So I think that does play a role. And -- but the protection businesses have kind of grown well. And you're right, on the core Policybazaar business, your numbers are about right. The 25% would be about the right number. And the new to renewal split across the board, since you asked that particular question, we are equally split at about INR 1,500 crores renewal, INR 1,500 crores -- a little more towards renewals, about INR 1,600 crores, INR 1,400 crores.Sarbvir, if you have any specific comments on any of the business lines?
No. I think Yashish covered the whole point. The savings business in the first quarter was somewhat weaker than it's been historically. So if you see last year, we've been always talking about savings being a big driver of growth. This year, because of March, so I think there was a big external event in March when the tax changes happened because of which the entire market has been a bit subdued, that impacted us as well.Other than that, I think the business has actually continued to grow very well.
We'll take the next question from Mr. Sachin Salgaonkar. Sachin, please ask.
Just following up on the question which ended, guys, just wanted to understand what kind of a premium growth ideally we could look going ahead. One gets a sense that savings is a bit muted, but clearly, other businesses like health and others are doing well. So can one look that for this year, 24% is more like a bottom growth and from these levels growth -- premium should increase?
Sarbvir and me are both smiling. I think we are very, very comfortable where we sit. We've had a tough quarter, no doubt about it, but we are very comfortable where we sit. As we review our numbers, everything seems to be surprising us positively. So -- but I'll hand over to Sarbvir, he is a more moderated one in such answers. But yes.
I think, Sachin, we would not like to give any kind of forward-looking guidance. But I agree with Yashish. I think based on where we sit, we do hope and we expect that the industry will do better than it did in the first quarter. And I think if the industry does better, then we'll also do better is how I would put it. We are finally a function of the industry.
Got it. Second question, I just wanted to understand, when I optically calculate the commission rate, which is your premium and revenue divide. So on a quarter-on-quarter basis, it does show an improvement of 12.4% to 16.8%. I presume this is a bit on the back of reclassifications on an apples-to-apples basis, possible to understand how the take rate has improved.
So our take rates have not changed in any material way. We have nothing much to report. There will be some business mix changes because obviously the protection business does usually have a slightly higher take rate, but nothing material. And I also -- last quarter I mentioned that sometimes there is quarter-to-quarter shift of INR 5 crores to INR 10 crores, which is if you think about it on INR 500 crores of revenue, that's roughly 2%, 3% here or there because you can't have everything exact, right? So, just some extra issuance may happen 1 month, some extra, some low.So I would say, just expect that. So maybe INR 10 crores here or there and look at this shifting over quarters rather than 1 quarter. There could be some billing arrangement that means that there's some incentive mark or some award mark you hit earlier, various things. So don't get -- but the base answer is, no, there has not been any material shift in any of our take rates. Is that right, Sarbvir?
Yes, absolutely. I think the only change in first quarter this year versus last year is the improvement in mix for the protection business. So protection is a larger portion of our mix this year. So that's why you see a small delta in the take rate.
Got it. And if we think about the renewal mix, any broad understanding of how much is between your own and PoSP?
PoSP is almost insignificant as a part of renewals. Like last quarter, our PoSP renewal -- like I should -- we usually don't give these numbers, but it's like meaningless. It's like a few tens of crores at most.
Okay. Very clear on that. And Yashish, as we speak, no significant or absolutely no updates on Bima Sugam, right?
It's a great platform. I think it'll do really very well. It's obviously initiated by the government and by all these insurance companies. We, as part of the idea, are also part of it. And we think it's a phenomenal platform. So yes, that's where we are.
Sorry, I wanted to understand from about the launch time and date, any updates versus on that...
Look, I'm not the right person to comment on that. Please appreciate it's a regulated initiated platform. We are a regulated entity. For us to comment on an initiative of the regulator, you're putting us in a very difficult position.
Fair point. And one last question, general thoughts on competition. We are seeing PhonePe getting a bit more aggressive into insurance, media article syndicates you, financial services is also looking at that. Any broad thoughts?
So our view stays exactly the same, and we're not being kind of cocky about it. The second largest player in the market is none of the names you took. We will not name them, but they are following pretty much our model. So we think our model is a good model. We are very confident of it. And almost nobody even heard of their name, but they follow exactly our model. And yes, they are the second largest player.So I think platforms having almost half the country's traffic on them are also not able to get as much volume as somebody who's almost unknown. So I think the model is very clear. This is a customer support model. Whoever has to compete eventually has to build exactly what Policybazaar has is my opinion because health and life is like that. But I would refrain from commenting more here. We don't want to -- yes.
I just want to add one thing to this, that, I think the best way to think about this is that there is a huge insurance market opportunity, right? One is here and now and one is the growth in that opportunity. And I think the idea is to get more and more customers to first come to Policybazaar and then buy from us. So I don't think it's just a platform versus platform game. It's actually a very big market opportunity, and we are one of the players in that market opportunity. So I personally feel that one should not look at it in a narrow way in terms of digital or something like that. It's a very broad set of people who sell insurance, and we are one of them.
So we did -- I'll just put a little more color on this. We were talking to our agents recently. We do that like -- Sarbvir does that all the time. I was doing it quite once in a while. And I asked them, what is the common rate between customers who come to you? And almost all of them said that somewhere their query was initiated by an incident. That incident could be the death of a colleague, friend, family member or a big disease or a big medical bill. So these are incidents.When that incident happens is pretty much the only time a person thinks about purchasing one of these products, right, where the customer has no immediate benefit, nothing whatsoever. But when that event happens, the reality of it gets triggered to them, and they decide to buy this. And when they do that, it seems like the most trusted name out there or the most obvious name out there seems to be Policybazaar at least from a digital search perspective, and so a bulk of them come here. And then they need a huge amount of handholding and purchasing this product because it's a -- it's not that straightforward.It's very easy to say that buy health insurance, et cetera. It's actually a hard product. And you have to manage 2 sides of the risk. You have to manage the information that the customer is disclosing and you have to manage -- make sure that the customer doesn't get miss-sold a product. Sometimes you almost have what you call false starts. A false start means you could get volume, but that could blow up at the other end in terms of claims ratios. And we've seen lots and lots of those in the industry and people are aware of those, right?So you have a lot of false starts, but -- and for a while, you could sustain a false start, but you can't sustain them at scale. So I kind of conclude that, that's the kind of thought through deep analysis of the situation here.
I'll just add one more things. See, when you talk about competitor, technically, anyone who is selling insurance in a competition, whether it's a bank or agent or any platforms. But at a very high level, the way we need to look at industry is if the customer thinking about insurance or not. So if someone gets up in the morning and think insurance, what really happen, do they come to Policybazaar, do they go to someone else.On the other hand, there are a lot of people who are able to sell insurance to our customer base who does not need insurance. So it's pull versus puts in a way, right? So from that perspective, as Yashish said and Sarbvir said, there are people who are trying to do a bit of what we are doing. But yes, there are lots and lots of people in India obviously who are selling insurance and there are a lot of banks who are selling insurance and have got a good amount of volumes.So from a competition perspective, technically everyone is a competition, but our whole efforts over last so many years have been put for -- meaning customer aware that you need to have in insurance in a core part of your financial planning. Second, one should think of insurance, come to Policybazaar. And third, once you come to Policybazaar, you buy some Policybazaar. And we are caught up in the third phase now where a lot of people have already [indiscernible] Policybazaar.
Our next question, Mr. [ Yash Gandhi ]. Yash, can you please ask the question? Hi, Yash, we can't hear you. Okay, we'll move to the next person. Ankush, please ask your question.
Just a small clarification. So in our [ RHP ] release, we have taken Board approvals for some infusion of capital in both Policybazaar and Paisabazaar. So can you clarify what is the reason for this? Specific reason, because since all these subsidies are profitable, I think they should be throwing cash back to the holding company rather than be in choosing cash. So any specific reason?
Yes. I mean if you look at our RHP filed at the time of IPO, we have clarified that this money is raised for 5 objectives, which have been mentioned in RHP. Those objectives are delivered through our subsidiaries and to enable spend and allocation of funds as per the plan, we are transferring -- every year we transfer share of money to those subsidiaries, which we will be incurring for the objective mentioned in IPO. Accordingly, we are transferring about INR 700 crores in Policybazaar, INR 200 crores in Paisabazaar and INR 200 crores in Dubai. This will be infused over a period of time as and when the funds are required in subsidiaries. And this is as per what we have with SEBI in our IPO documents.
So this is purely to need what we had disclosed at a time of RHP and [indiscernible] with the capital requirements assets, right?
Yes.
So you're right. As a group right now, we are generating cash. Last quarter also, there was a positive cash generation of INR 18 crores overall compared to March end. So yes, I think we hope to generate cash of almost INR 400 crores plus this year.
Next question will be from Mr. Rishabh Parekh. Rishabh, please ask your question.
Congratulations on a very strong quarter. I just had a similar question to the last question. What would be the -- generating INR 400 crores this year, what would be the overall use of our proceeds? Have we thought through this further? Some clarity on how we will deploy our cash?
So of course, the IPO proceeds are being utilized as per the RHP. However, you are absolutely right. We have about -- we have more than INR 5,000 crores of cash on our books right now. And we are adding to it every quarter, and we'll keep adding to it. So yes, in the next -- my expectation is that by '26, '27, we should have maybe close to INR 7,000 crores or so of cash, which is an interesting dynamic. And we need to think about utilization of these proceeds. So we will, with the Board, deliberate beyond March '24, what we do with these funds. But we have no specific plans as of now in terms of usage of that excess capital.At this point, we don't have anything to report on that. We are -- we do have ideas, but they are not mature enough to be disclosed as a public company. They are just management ideas as of now. We've not even gone to the Board with them. But it's unlikely to be acquisitions, just clarifying, very unlikely to be any major acquisitions.
We'll take the next question from [ Bhavya Sanghvi ]. Bhavya, please unmute yourself.
My question is related to the physical expansion, the store expansion that the company is doing. So it's been some time that the stores have actually been developed and wanted to understand the things that are improving the metrics, basically premium per inquiry that you fulfill through the physical store where the inquiry is online or the walk-ins. So how the size of the policies or premium per policy is different from the online business? And do you see material improvement or deterioration in the margins from the business done through these stores?
So our physical business, as you know, has -- we have almost 1,000 people deployed on that. We sell life insurance and health insurance, where we offer to meet consumers in their homes and offices. Right now, since it's something that we started about 18 months ago, it continues to improve in terms of productivity. Just to give you a sense, in our savings business, the ticket size, when you meet somebody is almost 45% to 50% higher than it is on the phone. In health and terms, it is higher, but by a smaller amount because as you can imagine, things don't change that much for the family or for the person whether you meet them or you don't.So I think overall, it has added to our conversion rates. It is added to our efficiency and productivity, and it continues to do that sort of quarter-after-quarter. And we are very, very happy, and we are adding to our capacity as we go along. So this year, we will add to that capacity. We'll open new cities as well as new locations where it'd be present. So I think this is now a leg that is there, and I think it will continue to grow in importance as we go along.
Yash was not able to speak because his mic is not working. So I'm reading out his question, which he sent to us on the chart. Question number one. Any impact on take rates due to EoM? And any guidance on that going up ahead?
So as we said, EoM has come into place as of 1st of April this year. And we have not seen any impact from EoM in any of our product lines or on the overall take rates of our business, and we don't expect to either. That's -- yes, that's right, Sarbvir?
Yes, absolutely.
The second question is what percentage of PoSP business was retail versus corporate last year? And where are we this year?
No, I don't want to go into exact specifics, but as I explained, our retail business is now a very significant portion of our overall business. And last year, it wasn't. I think we'd like to leave it at that. It's a competitive market, and I think this is a bit of detail which we can avoid.
The third question is contribution margins are at 45%, despite annualized run rate going higher. And this quarter, savings was also subdued. Any comments on the same?
I think savings being subdued, hopefully, was a quarter matter. Hopefully, by the time the year is over, we may have a different story to tell. And the margin at 45% is what we would have expected. If you asked us -- although we never said these things, but if you had asked us last year, what we think our margins will be about now, it would have been in the similar ballpark. So yes, I think no surprises at all. As I said, it's a pretty boring business. It's just -- yes.
I would just say that 300 basis points improvement year-on-year is a significant improvement. And I think we -- yes, I'm not sure we can be too defensive about it.
Next set of questions will be from [Samskar ].
Yes. So just had a curiosity question, like what percentage of premium must be coming from the offline segment that we ventured into the non-PoSP business like?
Roughly 20% of our life and health fresh premium comes from our offline visit capability.
This is the non-PoSP one, right?
Yes, absolutely. We are not -- we're talking of our core online business. So if in life and health, we do INR 100 of fresh premium, INR 20 comes from the FOS capability that we built.
And just to explain, it just means the closure happens or the last meeting happens offline, the customer still comes to the online to the website of that. And he probably spent a lot of time talking to the person, the contact center. It is just, yes, somebody also meets.
Yes. Got it. And also another medium-term to long-term question. Like I know certainly it has been repeated in the past call, but just to get more clarity as to what -- according to what are the main drivers of medium-term or long-term growth and how you are planning to outgrow, how much -- in what sense the industry? And within that, if you can share some color on the segmental growth of each of the products that you provide.
Sure. See, there are 2 parts, one is the revenue growth, and there is the EBITDA growth. Revenue growth as Sarbvir mentioned earlier, we are not decoupled from the industry. But the way we have been executing over the last so many years, we believe that we should be able to grow 2 to 3x in life and health. And that's been sort of a guidance we have been maintaining for some time now. If industry grows at 10% to 15%, that automatically means that we are looking at a number between near to 30% growth for life and health put together.On the EBITDA part, it's actually quite a simple business to understand. There are 3 operating and two nonoperating pieces that you will need to just track. On the operating piece, there is fresh, new, whatever you want to call it, the core business growth on a new side. The second is the renewal growth on the new side -- on the core side. The third is the new initiative and how much we want to invest in those initiatives. Then on the nonoperating side, there is ESOP and there is other income.Now if you just think through, renewals, ESOP and other income are almost automatic. They just happen because of the base. And that sort of explains 80% of the delta from last year full year EBITDA to what we are projecting for this year of what we are going to achieve this year or in FY '27. But you just need to have clarity around these 5 pieces on how they move, which will just explain the whole EBITDA story. Growth, I already mentioned that, hopefully, 2x or more of the industry for health and life.
And what we notice is look, we -- as Alok mentioned and I think I mentioned in the last call as well, Tapan Singhel sir from Bajaj Allianz said it very well to me once. He said the industry always grows together. It is not like one player will grow and the rest of the industry will go into the dumps, that never happens usually, right? You may have player to player shift a little bit. And so that's what we've noticed, right? Last year was a tough year for protection, and so we also struggled last year.This year, protection is somewhat coming back, although health growth is still somewhat complicated for the industry. But for us, we are definitely seeing the benefit of being 2 to 3x of that growth rate. And this year, broadly, except for certain push channels, savings has been a bit challenged. So for us also savings has been a bit challenged. So it's not like we can decouple from the rest of the industry. But yes, we will -- in most situations get better growth than the industry and thus keep taking market share.We are still a very small market share. We are -- yes. And plus the area we focus in will hopefully grow faster than the rest of the industry because protection is what we are focusing on. Thus, health and term, we expect to grow in a long-term basis faster than the rest of the industry.
Right. Additionally, I actually might have joined the call a bit -- I'm not sure if you will repeat it. What about the headwinds you might have faced in the PoSP business in this quarter, just if you [indiscernible].
Yes, I think the guidance we've given you is our new initiatives. We will spend somewhere between INR 150 crores to INR 250 crores every year. That's the broad range we'll be in, right? At some point, we'll reduce it. Beyond that, it's not too material to get into exactly what is happening in one particular quarter. I'll give you a very simple example. If you think about cycling races, sometimes -- and if you have to think about all of them, they are almost all decided at the last 1 kilometer. And the person who's leading the race almost till the end is the one who actually loses because it's the others who are -- so just reducing volume or increasing volume, actually in the PoSP business does not mean too much.We can -- as you saw, we could -- last year, there was almost 600%, 700% growth or maybe even 1,000% growth over the previous year. This year, you will see maybe 10% plus, 10% minus. Next quarter, you may be surprised by it totally. Even we might be surprised because we will keep changing our [ tax ] from quarter-to-quarter on this. And that is the competitive nature of the dynamic here. We -- now the question is you may trust us or you may not trust us.If you trust us, you will believe eventually we'll win. If you don't trust us, you can believe we will actually lose. Either way, it's not any material outcome to the overall organization. And that's, I think, the point you have to take home because the core business profitability will grow enough to dwarf any profit or loss coming from new initiatives. Just give us a bit of time. I think you will see that happen.
We'll take the next question from Nidesh Jain.
So, a couple of questions. Firstly, can you break up the EBITDA for Paisabazaar and Policybazaar for the quarter?
We don't break up EBITDA for the quarter by kind of business lines that way. But overall, the core business made about INR 69 crores of EBITDA -- adjusted EBITDA INR 69 crores was at core business. In this -- we don't really break it up, but a bulk of it would be insurance and a small amount would be credit. But I leave it there. We don't give the breakup, so we're not giving the big up, that's all. Because sometimes it's down to allocations, right, where some cost gets allocated, et cetera, et cetera. So we just leave it there.
Okay, sure. And secondly, what is the growth in the new business, a new premium health insurance side? Because I think that was the most important piece of business for us. On the retail, what is the new premium growth by line in this quarter?
Today, we have mentioned that somewhere between 2 to 3x of industry growth rate. Let's leave it at that.
Nidesh, it is a sensitive item because we live and work in the industry. We have given enough guidance with protection being at whatever rate, it's not extremely different for protection -- it's not like term is growing at 80% and health is growing at 0%. So if we said about 40%, they are in the same ballpark, but we don't want to be very specific. In fact, yes, I don't even want to be that specific because that also has issues with our declarations.
Sure, sure. And lastly, the NPV to direct cost ratio that we have been talking about, how that is trending?
That stays at the same at about 2.8x as of now, NPV. But again, that's an internal calculation. So broadly, our NPV to direct cost ratio is at about 2.8x. So that includes acquisition marketing.We hope to take it to 3x at some point in the future. That's the objective. So the target is 3x.
We'll take the next question from [Sehaj ].
Congratulations on a good set of numbers. I'm hopping back on the PoSP business, just one clarification. So if I look at the contribution margins, the margins have been quite volatile in this business. So I mean when you are doing this PoSP business, what is your sort of objective of doing this business because the end of the day, I mean, if you look at from -- look at it from a 3- to 4-year point of view, where do you see the contribution margins trending? Because the delta can be huge, right, from minus 10% to even a 0.5% or 1% contribution, positive contribution margin, the delta to our profits can be huge. That is one.And the second one is on the renewals business. I mean, why would the PoSP business not have any renewals? Generally, that is how your contribution margins tend to improve, right, on the renewals business.
No. So I'll take the second one first. The PoSP business will have renewals. It's just that because it was a new business for us, the renewals will come over a period of time. Secondly, the renewal rates in the PoSP business tend to be much lower than the renewal rates in our direct online business. So there is -- there will be a rollover. So those people will move to buying fresh policies of other companies. So those are kind of -- that is the nature of that business, right?In terms of the first question as to -- at least the way we look at it, last quarter, where you're referring to was plus 1% and this quarter overall is minus 10%, right, for all the 3 businesses put together. I think it's -- to my mind, it's not such a big change. I think these are corridors of how businesses operate. Last quarter, fourth quarter was very special in terms of the life business being a very, very large portion of the overall pie, et cetera.So I think it's in a very good range. And if you see it's consistently moving in the right direction when you look at it year-on-year and even sort of sequentially. I think the reason to do the business is very, very clear. I think there's a large portion of the business that is done by agents in the country that will always remain there. Agents need an efficient platform from which they can serve their customers. I think that is a platform that we have built, that we are building.And as our platform becomes more and more sophisticated and more advanced, I think the economics will also keep improving and you will see that the numbers will go in the right direction. But it's something that one need not move too quickly on because the shape of the business should be correct. We are happy to invest in that business for the next few years. As I think Yashish and Alok has said, INR 150 crores to INR 250 crores a year on the outside is what we're willing to do. And I think in that, we'll be able to build a very, very nice business, and you'll see that as we go along.
To get a bit more specific, I'm eager to kind of answer this all without maybe kind of giving out too much. See our fixed costs in that business, in the whole PoSP business, if you would, are broadly about, let's say, INR 35 crores to INR 40 crores a quarter. That's our fixed cost of technology, product, manpower, et cetera, et cetera. After this, essentially what you have is payouts. And 1 quarter you might do 2%, go pay out 1 quarter you might do. And they are -- we are figuring out quality. We are figuring out things. You would expect someone like us to be fairly mature about how to play this out and at the same time, play to win.And there will be moments of weakness and movements of strength and various things. So I think leave it at that. I think what you will find is as we build out our overall volume in this area, it will not have a material impact on profitability either way. Like Sarbvir would agree, it can't be more than 10% of our profits or losses either way in '26/'27, both ways it won't be. So it's not a material impact. It gives us huge volume credibility. And let's get this right, right? There is -- physical distribution is a big part of the industry and enabling it through technology is going to be a big win point. The final winners will be the ones who are able to get the technology right, but also the data right and all the analytics right.We have a huge amount of experience and a huge amount of understanding of this. It will also require operating profit strength, which our core business provides. So I think the final victory -- and if you really think about it, imagine if you did not have the core business and you were running only the PoSP, then that question which you're asking would be quite valid. But why exactly are you doing that, especially when there is somebody there who can support this PoSP business for a very long period through core business profits.It would be -- yes, so that's a very valid question, right? But I think these are all cycles here. And for us, we have to just wait out the cycle, and that's it.
Got it. I mean just one on the GST issue, which is floating around in the insurance industry. Obviously, we haven't provided for any of those liabilities, but do you anticipate a big amount hitting our P&L if in case hypothetically it comes through?
Well, just to provide you an update on what's happening on GST side. We have provided all information or clarification which have been -- authority relating to various discussion they are having with the insurer -- with the insurance industry. We haven't heard from the authorities after that. We are not expecting any hit -- any significant hit or any hit on us as of now. And let's see how it evolves, because the issue is complex for the industry. Let's see how it evolves.
We will take the last question from Mr. Nischint.
My question actually pertains to Paisabazaar. We've kind of crossed almost like INR 1,000 crores of disbursements a month, probably around INR 40 crores, INR 50 crores of revenues. So just trying to understand what is the point in which we sort of see the J curve of profitability?
Nischint, thanks for asking that. We are at about INR 1,300-plus crores of disbursals, like you said. You're starting to see the profitability improvement, like we mentioned. This is the 7th month now, 8 months that we are profitable since December '22. Our focus is to continue to now increase the EBITDA -- revenue -- EBITDA to revenue ratio. We would be operating at about 6%, 7% already. And you will continue to see improvement in that metric. And hence, the curve is moving in the right direction.We are seeing -- and that also is evident from the fact that when you see the contribution margin Q-on-Q is staying broadly in the 40% to 45% range as we grow the top line by about 50-odd percent or plus. So, in terms of absolute amount, if we are generating about 45% or so margin, a reasonable part of that starts to add to the profitability.
So what size of revenue or disbursals per month do we really see to achieve the optimal maybe, I don't know, 30%, 35% kind of an EBITDA margin? I mean are we like a year or 2 years are we assuming that we are able to maintain this [ update ]?
We don't want to talk about that kind of far out in terms of the projections. But like I said, we were -- we reached 0% in terms of breakeven in December. We already had about 7%, and we have an internal plan to keep moving forward on the EBITDA margins. And with the growth of top line, the absolute numbers start to look attractive enough. I'd say that we are currently -- our first goal would be to get towards 20% in a reasonable time frame, EBITDA to revenue ratio over the next few quarters. And once we get there, of course, we'll talk about the 20% to 30% journey.
Nischint, it is very tough change a lot of these [indiscernible]. We have moved from minus 13% to very near to double digit right now in last one year. But that's a very big change which has happened. And as we mentioned, the contribution number is very, very healthy, about 40%. So as our business grows, lot of it will flow down. [Technical Difficulty] But at what time we get to 30%, [indiscernible] 5 years. Obviously, the effort is to grow as fast as possible in a reasonable efficient manner. So if it happens faster, we'll be happy, definitely we want to do it. But right now, we are very laser focused on delivering a PAT productive year in FY '24 and a INR 1,000 crore PAT funding in FY '27.
Just to kind of give you a bit of color on this Paisa story. Last year, our renewal revenue was approximately what -- about INR 20 something crores. This year, our expectation -- again, we don't give guidance and all, but expectation clearly is maybe 4x that. So now what you're seeing is a INR 75 crore delta come within 1 year. And let's see, right? Let's see. See, Paisa has -- since the very beginning, Paisa has been always a strategic question mark and an operational positive surprise from over the last 8, 9 years. For our pre-IPO investment, also for post-IPO investments also, strategically everybody always asks us why you're doing Paisa Paisabazaar, why are doing -- Paisabazaar every quarter, just keeps executing and keeps doing better every quarter.So I expect the same. Obviously, 2020 was -- '21 was a special year when we had the COVID and cost credit had a difficult time. We are also exploring if we can get a higher share of the revenue because today Paisa is operating at a certain percentage, which I believe could potentially be higher. So I see lots of potential upsides on the Paisabazaar side. Let's see. Let's wait it out. I think it's going to be the positive surprise of the INR 1,000 crore number will be the Paisabazaar profitability.
That was the last question for the call. I now request Yashish to please close the...
Alok [indiscernible].
Okay. Thanks, everyone, for attending the call. It was wonderful to have you here. We obviously are now taking investor and analyst meetings from now till the end of the quarter. So please do reach out if usually in case you have any more queries, happy to answer them and maybe have a meeting. Thank you very much.
Thank you.