PB Fintech Ltd

NSE:POLICYBZR

Earnings Call Transcript 2025-Q2

[Rasleen Kaur, executive]

A very good morning, everyone, and welcome to PB Fintech Limited Earnings Call Quarter 2 Financial Year '24/'25. Today, we have with us Yashish Dahiya, Chairman and CEO, PB Fintech; Alok Bansal, Executive Vice Chairman, PB Fintech; Sarbvir Singh, Joint CEO of PB Fintech; Naveen Kukreja, Co-Founder and CEO, Paisabazaar; Mandeep Mehta, Group CFO, PB Fintech, and I'm Rasleen.

I would now like to request Yashish to start with the address.

[Yashish Dahiya, executive]

Thanks, Rasleen. So thank you all for joining, early morning for India. We are extremely pleased that the health and life insurance business, which as I have repeatedly said is the bulk of our long-term value, is continuing to witness phenomenal growth, 69% year-on-year in new premium for the quarter. And the total insurance premium for the quarter is now at [ INR 5,450 crores ] so at an ARR of almost INR 20,000 crores -- INR 22,000 crores. And of course, we are just in the second quarter. We are still out of season.

The new core insurance premium grew at 61%. Core insurance premium grew 49%. This includes renewals in Q2 with core insurance revenue growing at 41%. We've mentioned that this is now kind of going to be a point where revenue growth and premium growth will start coming in line after this because this is the phase when we shifted from a lot more towards the unit-linked products compared to the capital guarantee products, and that is the big difference that you have been seeing over time on the -- so -- but the core insurance revenue growth is at 41%.

Credit linked revenue is INR 143 crores for Q2. New initiatives grew 87% and are at a contribution level, not making any losses now. Our revenue for Q2 grew 44% year-on-year to INR 1,167 crores, and the PAT improved by INR 72 crores to INR 51 crores.

We have had slightly higher operating expenses. We understand that. I would say for this quarter, it was up by about maybe $4 million to $5 million. And from -- in the second half of the year, you will see that correction coming in. It's not a correction. Basically, we overinvested in Policybazaar in the first half of the year in anticipation of continued growth. Thankfully, we are continuing to see that growth and the benefit of that we will see in the second half.

On the Paisa side, we perhaps did not anticipate this slowdown to last so long. Now we do believe it is lasting a little longer, and so we will take some corrective action there.

On renewal trail revenues, those of you who have been following, I mentioned last quarter that this quarter, we'll grew at about 45%. So yes, we've grown at 45%, INR 633 crores ARR, up from INR 436 crores the same quarter last year. But this is -- there's no surprise here. So this could only be between 44% to 60% -- 46%. It couldn't have changed too much. But you will also see these sort of starting to inch up now. This obviously operates at a pretty high margin of 85% and is a significant growth of the future profit growth.

The most interesting thing is we finally hit 90% on CSAT. If you remember at IPO, we were at about 87%. This is a very hard number to inch up. We are finally at 90%. So very happy about that.

Credit business has been flat. I think the good news is quarter-on-quarter, it is about 9% up. However, year-on-year, it's 8% down. So yes, it's turning some corner, but there is still a lot of stress in that business. And we will be taking some corrective action on the operating cost front because we do believe that we had anticipated slightly higher growth than this.

We continue to strengthen our leadership in new initiatives with revenues growth of 87% year-on-year. And the adjusted EBITDA margin has changed by 14% from minus 26% to minus 12%. PB Partners is doing really well, very happy with the performance, 250,000 advisers, 18,700 PIN codes, 96% -- 98% of PIN codes in India. The quality of business, which from outside is very difficult to assess is clearly moving away well and in the direction that we anticipate. The UAE business insurance premium has grown at 63% year-on-year. That business also continues to do very well.

Our core health and life insurance business are growing ahead of expectation. Please, I just wanted to say this, don't get used to the 60%, 70% kind of growth. It's good. It's been happening. So far, it does not seem like it's changing. But listen, this is unreal growth. So our long-term guidance -- our mid-term guidance continues to be 30%-ish. So this is good. We are enjoying it. We are also surprised by it, but that's what it is.

In anticipation of a steady growth, we did, as I mentioned, invest a bit earlier. The other thing I wanted to mention was our cash balance has gone up by about INR 200 crores in the quarter, which is quite good. It is now more than INR 5,400 crores, but this will keep happening. As we mentioned, I think next year, it will go up a lot more. So it's just par for the course.

Open to questions now, please.

[Rasleen Kaur, executive]

[Operator Instructions] We'll take your first question from Shreya Shivani.

Yes. Sir, I have two questions. Yes, I have two questions. First is on the Paisabazaar side. What corrective actions do you plan to take? How? What is the outlook on credit disbursals that you're seeing over the next 2 quarters? And what has been the change in the mix of secured, unsecured loans over here? Some color on that would be useful.

And second is on the core insurance business. I wanted to understand that while the growth is very strong and it's very commendable, has there been any change in terms of the way the segments were moving? So maybe ULIP has slowed down a little bit, not as fast as the last 2 quarters or any such color? Just trying to understand because the overall contribution margin came in at 41%. I understand some bit of it got impacted due to credit business, but how much impact on that decline in contribution margins has come from the insurance business? And at what rate should the recovery be for the next 2 quarters? So do we expect that to come up to 42%, 43% or 44%, 45% by the last quarter of fiscal?

[Yashish Dahiya, executive]

Sure. No, thank you for those questions. On Paisa, I would just like Naveen to briefly give some color on that.

[Naveen Kukreja, executive]

Thanks. So like Yashish mentioned in the opening comments, in the unsecured side, which is both personal loan, business loan and credit cards, we are seeing slowdown lasting a little longer and it's -- if you've seen the -- or observed the bank results over the last 2 weeks or so, you see that reflecting in almost the entire industry, driven by, a, high growth in the previous years; b, the regulatory guidance; and c, some regulatory specific actions around moderating credit growth on unsecured side.

We're also at an industry level, seeing slightly elevated delinquency numbers at an industry level -- at an overall industry level, which essentially result in the prime and below segments being cut from a -- or being reduced from a new acquisition perspective. On the other side, we've -- like I said earlier, we're investing in the secured growth. So our secured business has -- on a very small base has grown very well. So now our secured contribution for last quarter was about 34%, 1/3 on disburses count.

On the cost measures, like Yashish mentioned, now we're moving to a situation where we expect H2 to remain tight in terms of growth. So we are going ahead and cutting the -- or moderating the operating expenses ahead of the revenue drop to make sure that we are able to be efficient for H2 and then wait for the market to show positive -- definitive signs of unsecured coming back.

I would just like to say one thing that at a fundamental level, if you look at the industry, where the liabilities growth, again, if you see -- follow the industry, liabilities growth is back, growing slightly better than previous few quarters. So we expect the liabilities growth for industry to grow at about between 12% and 14%. And once that happens on a consistent basis -- I expect that once the level settles in, the 14% or so needs to be deployed back into credit in a mix of unsecured and secured. So we'll see that growth coming back.

[Yashish Dahiya, executive]

And on the Policybazaar question, I will just request Sarbvir to chip in, please.

[Sarbvir Singh, executive]

Yes. Thanks, Yashish. So I think the question was on the segment growth. I think the growth...

[Yashish Dahiya, executive]

And the contribution.

[Sarbvir Singh, executive]

Yes. So segments have been growing in a very similar way. Both Q1 and Q2, we continue to see very strong growth in life and in health.

On the contribution side, I think there are 2 points. One is that as fresh health grows faster than the overall business, that has a slight impact in terms of the reported contribution, the first year contribution. So if you take out fresh health, we're not sharing those numbers, but you will find that actually our contribution has gone up in Q1 and Q2 if you compare the rest of the business. So actually, the contribution growth is exactly as it should be given the mix of the business.

As Yashish mentioned, there has been extra cost in Q1 and Q2, where we've invested in growing our operational capability for the season. And so you should expect, just like last year, if you see, there was a delta in the second half versus the first half of, I think, 200, 300 basis points. And somewhere in that region, it should -- a similar outcome should happen. We can't say exactly what will happen.

See, I just want to say broadly that the thought process on the insurance side is that we are seeing strong growth, so we want to invest ahead of that growth. And so it's -- I mean, in the sense that in the second half, we feel that we should prepare more for the first half of next year or something like that, we will continue to invest because I think our shareholders would want us to invest at this stage and grow the business rather than reporting a few hundred basis points of margin in any given quarter.

[Yashish Dahiya, executive]

No, absolutely. I think there's 1 little piece in comparing quarters and it's usually not very good comparing quarters. See April, we did not have much of brand advertising. So what that leads to is that in Q2, you might see a slightly higher brand advertising, about INR 20 crores. Now that's a very significant number when it comes to contribution or profit numbers. So you would in Q2 have seen a INR 20 crore higher brand spend, but that is largely because in April, May, June, you may advertise only 2 out of 3 months.

So with that, I don't think there's much else to kind of add in that. But to Sarbvir's point and to the point I mentioned, like we are, at this point, not trying to optimize for a few basis points here and there. I think the objective is to grow. We know what net present value we do our business at, and it's very, very profitable for us.

Of course, it will never show up in the first year because health is a business where a bulk of the profitability lies in the renewals. And so when you grow in the first year, you will not see that, and that will lead to some diminishing of margins. However, that is obviously going to pay up in the coming years, and that is far more important.

[Rasleen Kaur, executive]

Thank you, Shreya. We'll take the next question from Sachin Dixit.

[Sachin Dixit, analyst]

Congrats, Yashish and team on another great set of results. I had a couple of questions. The first one was in terms of growth, right? So as Yashish already highlighted this, the growth that we are seeing currently is unparalleled. I was just wondering going forward basis, like will there be a base effect issue that might crop up in fiscal year '26 that rather than having the medium term, like the 30-odd percent growth, we might end up being around more like 24%, 25-odd percent? Can that sort of thing play out?

[Yashish Dahiya, executive]

So you said you had many questions. That's the only question. See, I've always said from the day of IPO, there's one thing we can never predict, which is how much we are going to grow. Everything else is actually very, very straightforward. We can predict everything else quite precisely, renewal growth, profit, all those things we can predict very, very accurately. And we are very excited that we are growing. We are not seeing any signs of slowdown yet. We are actually growing on a pretty large base already. So this is growth on growth. Now we are starting to grow at 60% on 60%. So we are ourselves surprised. Sometimes we pinch ourselves that, is this true? But let's see.

As I said, our medium term, so me and Sarbvir discuss this all the time, our basic understanding is 30% is what we want to target in the medium term, and that's a good target to have. We don't want to be below that. Above that is great. Above that, I don't ask Sarbvir any questions. Anyway, Sarbvir, I don't ask you any questions anyway. But as long as he is kind of doing double of that, I can't go to him and say, please reduce cost also or something of that sort. So I don't have any such questions whatsoever.

[Unknown Executive]

Sachin, I'd just like to add one thing here. See, we've always maintained large part of population who has intention to buy insurance in near future come to Policybazaar, especially for protection products. And there were some reasons of them leaking out. And over the last 3 years, the team has worked very hard in terms of setting up multiple offices across India to cater to different languages, physical meetings, strengthening on the product side, strengthening on claims side with putting up a whole team.

All these things have started to add up, and a lot of people who would have come earlier and maybe found some excuse to leak out. That leak out has started to come down over the last 2, 3 years. And India still is very, very underpenetrated from insurance perspective. And there's no reason for us not to grow. But as Yashish said, whether it will be 30%, 40%, 50%, we'll see. Obviously, our aim is to grow as fast as possible. That TAM is not a problem in India, to be honest. It's a very, very large customer base.

[Yashish Dahiya, executive]

And I think a very telling conversation actually happened yesterday, and it's just anecdotal, but I was actually speaking with somebody, and this person said, look, historically, I used to actually come to Policybazaar and then go and buy directly, but now I'm actually buying on Policybazaar, and this is a very knowledgeable person from the financial services industry because he said, "I know that at the point of claims you guys help." So I think that is becoming a very serious position. So I think the reason not to buy from Policybazaar is going away slowly, and all credit to Sarbvir and team for kind of executing that, making sure that reason doesn't exist anymore.

[Sachin Dixit, analyst]

Fair enough. Another thing, which was obviously -- has been -- you have been in the media talking about this. There was no mention of that in the presentation. Is there any update on that, any Board discussion and any approvals that you are likely to announce?

[Yashish Dahiya, executive]

On what?

[Unknown Executive]

PB Health.

[Yashish Dahiya, executive]

So I wanted to just take this opportunity since you've asked this question to clarify a few things, right? PB Health is not a -- and I'm not going at pains to explain this, right? But the point is PB Health is not a Policybazaar subsidiary or a Policybazaar initiative. I just wanted to clarify that. Policybazaar wants to make it happen. And see, I'll try to -- I think you know the what and why. Maybe the how is not very clear. The what is very clear to us that, whenever I speak to insurance companies, they are not very happy with the situation. They all believe that there are excesses at the provider end. Because of which, their claims cost goes up, and also they believe the customer experience suffers. When I speak to hospitals, they're also unhappy with the situation. So everybody is sort of unhappy. Everybody does not trust each other.

And I think -- then I ask insurance companies, and I've started doing this recently that what would you do if you owned your own hospitals? And the first thing they usually say is we'd like to run them with charities. I'd say, but I assume that's not possible, assume that's not a feasible option, they have to make money. They said, we would just like to agree SOPs with them, and they should just follow those SOPs. If they follow those SOPs, we believe the cost will anyways come down by 20% or so.

And I say, but what will you do for the customer if that were the case? Would you be able to -- customer has 25% out of pocket today. Will you be able to reduce that out of pocket for the customer? They say, "yes, absolutely." And I say, does that mean the customer will have lower friction at the point of claims? They say, yes, if it was our hospital, we trust it fully. We actually don't need an approval process. They say, what do we have an approval process for? We don't know what the customer has told the doctor. We want to know because the customers told us one thing and he has told the doctor another thing, and we want that discussion between the customer and the doctor to be disclosed. We want -- and -- so it's basically a lack of trust. So if there is an outsourced facility for the insurance industry, I think the claims experience can improve.

Now Policybazaar will not be the one who will set this up. But if this gets set up, Policybazaar is the huge gainer because if the insurance customers buy more insurance because the insurance experience becomes better. And if Policybazaar is also a shareholder in that and Policybazaar can claim to its customers that listen, when the situation arises, we'll be able to help you in this situation, and we'll make sure your claims experience is very, very smooth.

I think Policybazaar will benefit humongously, and the industry will benefit humongously. And so everybody I speak to, is quite keen on that project happening. Now what position Policybazaar will take in that, totally depends on its own shareholders and it's Board. So those approvals we still have to take. At this point, yes, the what and why are extremely clear. The how is becoming clearer, but there isn't an approval in place yet.

[Rasleen Kaur, executive]

We'll take the next question from Nischint. [Operator Instructions].

[Nischint Chawathe, analyst]

Just continuing with the health care business. Just trying to understand from a very top-down point of view, if you have to make it sort of a business of scale, and when I say you, I mean the venture has to be a venture of scale, what kind of CapEx are we really looking at over a multiyear period and what contribution...

[Yashish Dahiya, executive]

I have -- so I'll answer in 2 ways. The only thing that Policybazaar is not sure of at this point is whether that venture will make money or not. It has no clue. What it knows is that Policybazaar will benefit. And that's the only reason Policybazaar is involved. Policybazaar is not investing in this venture from a financial return perspective. Policybazaar if it is investing from an enablement perspective because this venture benefits Policybazaar a lot, a huge amount, right, and the industry a huge amount. That's why the industry supports it. That's why Policybazaar will supports it.

Now what happens to that venture, how much capital that venture needs to raise, whether that venture is profitable or not, is a question for the shareholders of that venture to decide, not for us to think about as Policybazaar shareholders because we are not the people who are building that or anything of that sort.

I'm just trying to clarify. I think this line -- this distinction needs to be drawn very clearly, because I don't think Policybazaar shareholders need to worry about whether that venture is going to be profitable, how much capital that will require. Yes, Policybazaar Board will decide what is the upper limit of the exposure Policybazaar wants to have in a situation like this, where Policybazaar thinks of how much it can invest to make sure that this venture happens. But it is investing for only one reason. Please appreciate this, only one reason, which is to make Policybazaar grow faster, not to make a financial return.

And what I would say is suppose Policybazaar can achieve at the lower end a 5% extra growth every year because of this venture, you can imagine what that means over a 10-year period, right, and how that will play out. So I think I would leave it there at this point. Because, otherwise, it becomes too complicated story, right, that one is trying to justify the PB Health venture to PB shareholders. I don't think that makes sense.

[Nischint Chawathe, analyst]

No. No. Fair point. So PB will be like a founder promoter or is it a minority shareholder in this?

[Yashish Dahiya, executive]

That totally depends on what the Board approves. We haven't even gone to the Board for any approval. We don't have a proposal to go to the Board yet.

[Nischint Chawathe, analyst]

Okay. Got it. You mentioned -- sorry, just moving on, you mentioned that UAE is up 63%. Does that include corporate as well?

[Yashish Dahiya, executive]

UAE, that includes everything in the UAE. And that is -- the premium has grown at 63%, yes.

[Nischint Chawathe, analyst]

Corporate business?

[Yashish Dahiya, executive]

Yes, it's mostly [indiscernible] they don't have any corporate business. They are only -- they are -- so you want to know how much corporate business has grown?

[Nischint Chawathe, analyst]

Yes.

[Yashish Dahiya, executive]

Corporate business has done about, it's grown at 62%. It's done INR 189 crores.

[Nischint Chawathe, analyst]

Got it. Just the new initiatives margin, is it possible for you to split this or give some color between PoSP and UAE and corporate?

[Yashish Dahiya, executive]

The UAE and corporate are very small from a P&L perspective. From a profit perspective, they would be combined maybe 10% to 15% of the total profit or loss of the new initiatives. So new initiatives is largely PoSP plus, I would call it. PoSP is bulk of the profit part and the loss part. And yes, so 85%, I would say, would be PoSP.

[Nischint Chawathe, analyst]

And what's driving margin expansion in the new initiatives?

[Yashish Dahiya, executive]

Yes. Basically, in PoSP, you have to understand the business very clearly. PoSP is not a massively profitable business ever. So somebody who believes that PoSP will start generating the same kind of margins like -- contribution margins like Policybazaar has is dreaming -- because -- like Policybazaar core has is dreaming because that's impossible, right? Nobody will work for you for -- let's say, Policybazaar core is making, I'm just saying, suppose, 40% margins. Nobody is going to give you their business for 60% of the going commission rate. So if the going commission rate is, let's say, 20%, if you give somebody less than 12%, they don't want to give you their business. So that's impossible, right, ever. And that's before you put any direct cost into it.

So I think it's a very low margin, high scale business. I think that is where many of the investors have got confused by that business because that business, you can scale very rapidly without necessarily, like you can burn whatever you feel like, but without necessarily increasing your burn dramatically. So like -- unlike a B2C business, it does not have marketing costs or sales costs. What it has is basically you're a platform and you're a very thin margin. It's like a payment gateway business, right? You're a very thin margin business, payment gateway business with some operating expenses.

So your profit and loss both don't increase and don't change a lot, with scale. Unlike Policybazaar, where because of the -- unlike the core business, where your profit and loss shift dramatically because of scale. In a PoSP business, that would not happen. So what you would see is it will slowly ebb towards 0 and then it will become profitable also. But by that time, the core business will become significantly more profitable. And so it would always be irrelevant from a -- see what was happening if you look at the last 2 years, the core business was making x profit and this thing was making minus x loss.

So it was -- to an extent, both were looking similar. But as you look at it over a 3-, 4-year period, the core business will become 10x bigger in terms of profit or loss, whatever, I hope not loss but profit compared to whatever losses we make on this side. So this part becomes irrelevant. But I think that's what the PoSP business is. Scale has nothing to do with losses because your losses are your fixed costs and your payout versus pay-in margin is very, very close to 90%, 95%, et cetera. So if you are making 20% commission in that business, you are eventually left with only 2% to do everything else.

So I think that's very important to understand, at least from an investor perspective. We understand this, but I think investors need to understand it. B2C and PoSP are very, very different. I still believe many don't understand it.

[Nischint Chawathe, analyst]

Fair point. And just finally, most of this is Motor TP, right? I mean, I think in the past, you...

[Yashish Dahiya, executive]

It's not -- yes, now lots of health, et cetera, starts happening there. But yes -- but it's -- we have the highest share of non-motor, but...

[Nischint Chawathe, analyst]

And what is the mix like? And what is the mix like?

[Yashish Dahiya, executive]

We don't give out that number, but that number on a revenue basis -- see, because there's a reason that we don't give out these numbers that it can be very misleading to people. But on a revenue basis, it could be quite significant. More than 1/3 of the revenue might be coming from nonmotor.

[Nischint Chawathe, analyst]

Got it. And just one final one is life insurance companies have been kind of telling us that on the guaranteed return products, there is some kind of a discussion, negotiation that's happening with the distributors. So just wanted to understand what is it -- what kind of conversations are you really having with them, right?

[Yashish Dahiya, executive]

So we are generally not involved in any of those conversations because we don't really sell those products, but Sarbvir is the best person to answer that.

[Sarbvir Singh, executive]

No. I think as Yashish said, we -- the mix of our business is not toward those products. And secondly, I think if you see the persistency and the quality of business that we have, I think we are really not the channel where these issues will arise. So I think that both those points, I mean, a, it's a very small portion of our business. And, b, I think we have the credibility and the quality has been established with our partners that they are not really coming to us. I think they have to handle it in the other channels where obviously, it's a bigger issue.

[Yashish Dahiya, executive]

Sorry, I was a bit wrong. Our total new initiative loss, so UAE and corporate are about 45% of the current loss. That's because PoSP losses have really come down. So just wanted to clarify that. So PoSP losses have come down quite a bit, so it's not 85%. It's about 55% is PoSP.

And Dubai and corporate about the same. The reason I say that is because Dubai and corporate sort of they lose INR 1 crores to INR 3 crores every month, and that's been quite flat for the last 2, 3 years. So it's not like they relatively -- relative other businesses, they don't make a big dent on things.

[Rasleen Kaur, executive]

We'll take the next question from Dipanjan Ghosh. [Operator Instructions] We'll take the next question from Manas. [Operator Instructions]

[Manas Agrawal, analyst]

I had a couple of questions on the PB Health, but before that, one question on the core business. Is there any change in ULIP momentum because of the recent market cool down? And then on PB Health, you mentioned that PB Health will benefit. I understand that's very clear. Can you also share and maybe it's too early, the modalities around this? Is this a co-branded product? Is this a potential distribution exclusivity? Or is just a larger addressable market?

The second is as a PB shareholder and not a shareholder at the new venture, how should we think about capital allocation in this venture? Is this going to be a onetime investment, especially when we are talking about the new entity not necessarily clear about their financial viability or their model of profitability? Those were my questions.

[Yashish Dahiya, executive]

I will let Sarbvir answer the first question on ULIP.

[Sarbvir Singh, executive]

I would say, Manas, that it's too early to say anything. I think last month was a confusing month in any case because of Diwali and all those holidays and all. So we like to look at October, November together. So we'll get a better sense next month. But yes, I mean, I would say, very generally speaking, a little bit of up and down in the market doesn't affect the business that much, but obviously, if there is a prolonged downturn or something like that, then I think the business will definitely be impacted.

[Yashish Dahiya, executive]

So on PB Health, the way -- I would say we haven't gone to the Board and the Board has to approve this, and we have to first of all go to the Board, my hope is that we would go to the Board at some point with a onetime investment option. And it will be somewhere between $0 million to $100 million, and it's a onetime investment. It will not be repeated. The remaining investors who come into PB Health are very aware of that, that PB is limited by this as a onetime investment.

And to the comment I made about, look, let other people worry. I think once the quality of investors that come on board in the new venture are clear, I think it would be clear that they have clearly thought about why they want to invest in that venture. And that would also mean there is enough financial prudence on that venture to make it now.

What is the problem we are trying to solve? The problem we're trying to solve is a very simple one. Today, the customer is not having a great claims experience, and that is largely arising because of lack of trust between 3 entities: the insurance company, the customer and the hospital. And unfortunately, at the point of claim, the hospital and the customer are sort of become somewhat on one side.

And so whether that is -- we shouldn't even be speaking about these. Me as chairman of a large public company, I don't want to -- I don't know how much I should speak about things like overcharging, overtreatment, all kinds of things that go on in the market. But they are quite commonplace. And I'm not saying any 1 entity or a group of entities is responsible for it. But today, we are a pay-for-service health system. And what that means is the health care system makes money. It's obvious, they obviously make money when the treatment happens. So if I don't go to the hospital, the hospital makes nothing from me.

And I think if I have an insurance policy and I don't go to the hospital, the insurance company makes all the money from me. Now thinking through how will the products be constructed, how will it all happen? I think for that, I would say, wait for PB Health to become a public company and then let's have those questions on PB Health once it is a public company, till then whoever are the private shareholders of PB Health will handle those questions, and it's their responsibility to lose their money, I would say, if they do lose their money.

[Unknown Executive]

Manas, but you asked about the shareholders of PB Fintech. Now, 2 parts here, as Yashish mentioned earlier, if this can allow the growth for Policybazaar to be higher, even by just 5%, 7%, that is a very material positive thing for Policybazaar or PB Fintech.

From capital allocation perspective, we have come out about a couple of weeks back and mentioned that we propose to have about $100 million investment into this venture post Board approval. Bulk of that investment, if you just think about this venture, will go towards the CapEx. And hospital CapEx, which is mostly a real estate [ infrastructure ] play will technically not just erode overnight. So that will hold its value and as it becomes successful in its own right, that value keeps on increasing.

So from a [ personal ] perspective, it is just a small capital allocation, which is mostly going towards CapEx with very low possibility of capital erosion, but from PB Fintech perspective, the growth which it can drive for industry and for us can be very meaningful.

[Yashish Dahiya, executive]

Now -- and I just wanted to clarify one thing. The reason we are getting into it is not because we think health care is a great opportunity and we should go into health care and set up hospitals and run hospitals. No, that is not the reason why we're getting into it. So I think this is a confusion if people believe that to be so.

The reason we are getting into it is because we believe the insurance industry and thus Policybazaar, you're seeing our growth rates, right? With these growth rates, we are becoming a very meaningful part of the industry. And we're a very meaningful partner in the growth of this industry. And so for us, it's very critical to look at the long-term growth of the industry, and that is the reason they're getting into it because they're seeing that particular problem. We are seeing this as a potential problem for the industry growth, if not solved.

And that's why while we don't have the ability to do this entirely on our own, if this is happening, we would love to encourage it in whichever way. So evangelizing, encouragement, et cetera, et cetera.

I think -- now that said, I'm just as excited about that side of the opportunity as well, but that is me personally. That I don't think is -- that's a different matter. And I don't think we should confuse the public company Policybazaar with that thinking, why this is a great opportunity by itself because that will just lead to us kind of hijacking the Policybazaar story with PB Health story.

[Rasleen Kaur, executive]

We now request Dipanjan Ghosh to please unmute.

[Dipanjan Ghosh, analyst]

So just a few questions. First, if you look at, let's say, product-wise on the insurance side, on the core insurance side and look at the new business margins, without quantifying, would it be a fair assumption to make that on a Y-o-Y basis, across products, you would have seen a margin improvement, but maybe because of the mix shift towards health or more towards the hybrid strategy, maybe there would have been a drag? But across products, would it be -- I mean, what would be the trajectory on a Y-o-Y basis in terms of new business margins on the core business?

The second question, in your presentation, you've mentioned that because of the hybrid strategy, your premium per inquiry and your conversion rates have kind of inched up. So just wanted to get idea on 2 things. One is, what would be the mix of the products on, which gets converted at the hybrid mode? And second, is there a meaningful differential for the same product in terms of margins, whether it gets converted through your call center or through the hybrid model?

Last on the insurance side is, you've mentioned that there are like 190-plus cities where you have health support and claim support, and there are 200 plus cities where the hybrid model is in place. So would you like to quantify on the overall feet-on-street expansion that these 2 initiatives would have seen, let's say, over the past 12 months?

And just one question on the credit side maybe. So if you can split the revenue between credit cards and disbursals? And second, what would be the differential between, let's say, secured and unsecured realization rates?

[Yashish Dahiya, executive]

Sure. I think let's -- I would let Sarbvir cover the insurance questions first and then come to credit.

[Sarbvir Singh, executive]

Yes. So Dipanjan, I'll go in order. The first question was on new business margins. New business margins on a like-for-like basis are largely the same year-to-year. There may be actually a small, I would say, delta -- erosion rather than growth in like-for-like margins simply because if you see the quality of products that are being sold on our platform. So you'll find that now we sell in most cases, products which are -- have better features and in some cases, lower cost than the average in the market. And that's a very conscious choice because of the quality of business that we have, we are willing to trade off that price, up-front price for greater volume. So I think the new business margins are largely the same. If anything, they may be a little bit on the downside only.

In terms of hybrid, the question that you had, see, our hybrid business works with the marketing cost being the same, right? The lead comes through the online channel, and we have already paid for it. So I think it would not be fair to look at just hybrid margin versus overall. We actually look at it as an overall whether the AP per lead or the business economics are improving or not. And I think that you can very clearly see that they are. The hybrid or the feet-on-street is now almost 25% of our business in health and life insurance. And we still feel that there is potential for that to grow.

This team is growing at a faster rate than the rest of the business. Of course, there was a smaller base to begin with. But I think we feel more and more confident that this strategy is working and the fact that it has legs. So it's not like we have covered the areas that we could cover, but I think now we have the confidence to go deeper, and we are investing both in people, in leadership, in infrastructure so that we can build this into a much larger business in the years to come.

[Yashish Dahiya, executive]

In terms of credit, your question on revenue mix, unsecured credit would be about 60%. Credit cards would be about 20% to 25%. And secured would be about 10% to 15%. So it's secured is about 10%; unsecured is about 70% and maybe 20% is credit cards. On the total disbursal, secured will be a lot larger. Secured will be about 1/3, but secured is also about 1/3 of the take rate. So just sort of -- I think that gives you a flavor of the mix there.

See, we are growing secured right now, but that doesn't mean unsecured is going away. Unsecured, in our opinion, just going through a dip. This happened in COVID. In COVID, we went down to almost 0 revenue on the unsecured side. And this is happening again. I actually see it as a margin expansion opportunity, to be honest. So if you think on a multiyear basis, when COVID happened, before that our margins in Paisabazaar used to be 0. After that, our contribution margins became 40%.

So I think we realized we did not need as many people. I still believe that is the case. And I think this will give us an opportunity to reduce and not come back up in terms of the actual manpower costs. So -- and obviously, technology, et cetera, helps. So it's a phase we are going through, the phase is lasting longer. We thought it would last 2 quarters. It's probably lasting 4, 5 quarters. But that's fine. It's just a phase. I think -- I would hope '26 will be a very different result from '25.

[Dipanjan Ghosh, analyst]

Got it. Just one small follow-up on the previous participant's question. When you say 30% medium-term sort of vision, I would assume it would be on the fresh business, right, because your back book growth -- I mean, the sort of new business growth you've seen over the last 2, 3 years, should kind of mirror on the renewal side, let's say, over the next 3 to 4 years? I mean is that a fair assumption?

[Yashish Dahiya, executive]

So all I would say is, yes, the renewal growth is quite predictable, and you can -- we can build it out quite easily and so can you. I think fresh business is very difficult to predict, please hear us, right? What we're saying is, over a 3-year, 4-year period, our target is to have 30% fresh business growth. It's a good stretch target, right? It's not an easy target.

Now if they have come a few quarters where it is lower, don't start shooting us. Just like we're not asking you to kind of put on a pedestal because we're growing at 60% for -- yes, but now it's gone up for like 4 quarters or so. But I would say -- I think these things will happen. Things will move up and down. But I think on a steady basis, I was looking at the numbers. Our 3-year CAGR is about 41%, on fresh business. So I looked at that number. So I think our 3-year CAGR is quite strong. And what we are saying is maybe the next 3, 4 years CAGR is going to be maybe 30%.

[Rasleen Kaur, executive]

We'll take the next question from Jayant Kharote. [Operator Instructions].

[Jayant Kharote, analyst]

Congrats for a good set of numbers. First is on the addition that you've been doing to your teams, both, I think, online or even off-line. If you can help us understand how is the gestation period over here? If you could quantify the number of people you've added over here? And what are the plans going into 3Q, 4Q, and in the gestation period? That is the first question. I'll come back with the second question after.

[Yashish Dahiya, executive]

So here, look, it's a variable cost. As we anticipate business, we -- and inquiries, our inquiries have also been going up, we deploy people. As we have said repeatedly, Q1 and Q2, there has been about $1 million a month of extra cost on the [ op side ], which we deployed because we were seeing a higher-than-expected growth. And we continue to see that growth. So our hope is that in the second half of the year, we would not need as much additional capacity. And I think it will play out quite well.

In fact, see, and the gestation period is a few months. People don't sort of come on the -- become a person in our shop and suddenly become productive. And that's the reason we said that look, in the lean period which is the first 2 years -- in the first 2 quarters, we -- let's deploy a little extra so that we can really reap the benefit when we get to Q3, Q4. So this is -- hopefully, it will be a good strategy. It could have proven to be a bad strategy if we did not get the growth, but so far, it's looking okay. And fingers crossed, it will prove to be a good strategy as we go through, but we don't expect number of people to go up too much from here for the rest of the year because we would now kind of [ limp off ] the vintage.

[Jayant Kharote, analyst]

Great. And is there any product gestation as well? Do the new [ construct ] starts with certain products and then the basket increases? Is there a strategy like that?

[Yashish Dahiya, executive]

Yes, most of our people go into specializing in a particular product, handling a single product for customers from 20 companies is quite a complicated task to start with. So they are mostly specialists at 1 product, at any 1 product.

[Jayant Kharote, analyst]

Understood. The second question is on the PoSP business. Again, we see, like, the losses have come down significantly year-over-year. There's also some news of a merger in that space, and you have been sort of talking about at some stage in future consolidation in this sector and we see that -- signs of that playing out. Does this mean that this place can start seeing better profitability and probably we are nearing that phase of consolidation in the next, say, 4 to 6 quarters?

[Yashish Dahiya, executive]

Hear me very, very clearly on this. I've said it in the past, we will be acyclical. That is the right strategy we follow. So when the market starts becoming profitable, we'll start making losses in that area. And when the market starts making losses, we will hold back. I will not clarify more. That's our general strategy. It does not mean anything from a quarter-on-quarter perspective, but that is exactly the strategy we follow.

And I'm saying over a 5-, 10-year period, that is the strategy we follow. We will always be countercyclical, which is what a market leader would be. A confident market leader who's a marathon runner has to be countercyclical. He does not start sprinting just because some kids are sprinting for 5 kilometers. He waits for them to tire out. When they tire out, he tells them that you're tired, I'm going fast now, right? So I think -- yes, I'll stop there, but that's the -- countercyclical is the word.

[Jayant Kharote, analyst]

And just last question. Are you open to inorganic acquisitions, inorganic growth in that sense as well?

[Yashish Dahiya, executive]

0, 0, 0. Not at any price like is in the market, not even 1/3 of those.

[Jayant Kharote, analyst]

Congrats once again for a great set of numbers.

[Rasleen Kaur, executive]

We'll request Rishi now to please unmute yourself. Rishi Jhunjhunwala, please unmute yourself.

[Rishi Jhunjhunwala, analyst]

Just one question, Yashish, on the thought process around PoSP, right? So if you, we really look at it, our new initiatives are now almost 40% of our overall insurance business revenues, maybe slightly less and has grown at almost 2x our core insurance revenues? Just wanted to understand how much of this growth is intentionally pushed by us versus how the business is evolving and how the business is coming to us. And if we are driving this growth to be that much faster, then what is the thought process around it, given that it is anyways considered not that much margin accretive in the long term as well?

[Yashish Dahiya, executive]

So I'll answer at some level and then I think Sarbvir is the right person for this. See, strategically, we're doing PoSP for scale. We are also doing it because -- we started doing it because it was happening. So we were a late entrant. If you remember, we were almost the last entrant in the market. So we became a market leader within about 3, 4 months. That usually should tell you how easy or difficult the business. If somebody can become a market leader in 3, 4 months, it usually means it's not a very complicated business. And almost anybody who's trying to scale in PoSP has succeeded if they had the money. There is almost nobody who's failed if they had the money to scale in PoSP, right?

Now that said, that scale has humongous benefits from a relationship perspective for us because our overall business grows because of that, and we would be delighted to have a larger business. So nothing wrong there and doesn't cost a huge amount. Its -- losses are coming down and will continue to do so at least in a medium-term basis. I don't know, Sarbvir, if you want to add anything specific.

[Sarbvir Singh, executive]

No, I just want to say that, see, about 4 quarters ago, in fact, 5, last April, May, June quarter, we made a decisive shift in the business strong, really forcing the growth, I think the word that you're using. If I were to say that, perhaps we were forcing growth till then. But after that, we have actually switched gears and we have gone deeper into the market, both in terms of working with smaller and smaller areas and in geographies where other people are not there.

So now if you see, I think it is no longer that we are forcing the growth. Because if we were forcing the growth, then profitability could not come, right? We would lose more and more money. So the fact that we're able to grow at, frankly, almost 100%, I think, in the first half and improve our losses or keep the investment constant or lower than last year indicates that we are not forcing the growth, but we are doing something right.

And I think to give credit to the team, I think the fact that our platform is now clearly superior to everybody else. I think the fact that our sales capability is now superior to everybody else. The fact that agents are trusting us more than they're trusting other platform. See, finally, this is about agents. This is not about anybody else.

And the fact that agents are now trusting us more than anybody else because we pay on time, we pay in full, et cetera, et cetera. I think is now starting to bite. And so today, I don't think we're forcing it. And this has implications for how this business will go in the future. This is not going to be a business where you're going to make a lot of money in terms of margin percentage. But perhaps at some point, if you have a lot of scale, you will start making some money.

And I think that's our hope, and that's why we are trying to drive this business. And I think our confidence in, I would say, growing this business and investing behind it has only grown in the last 3 years because it's rare for a business in its fourth year to be growing faster than it was first few years, right? That's quite a rare thing and with better economics.

So I think there's everything to like. But yes, we have to be very realistic about the shape of this business. And hence, I think comparison of PoSP premium with core business premium and saying that its 40% or whatever is probably not the right way to look at it. I would not encourage you to go in that direction.

[Yashish Dahiya, executive]

Yes, certainly not. It's like India has a football team and a hockey team and they're saying because our hockey team does well, our football team shouldn't do well. I don't think that's all right. They're are totally different. We want gold medals in both of them. But just one thing, Policybazaar core is growing the fastest it has ever done in its the 17th year. So just saying.

[Rishi Jhunjhunwala, analyst]

Fair enough. The second question is you talked about extra investments you have made in the last 1 or 2 quarters on building up capacity, and there is typically slightly higher ad spends and other things that has happened in 2Q as well. Is it fair to assume that our overall cost pool should be relatively flattish over the next 2, 3 quarters given the capacity buildup and some of the extra expenses that have done already?

And secondly, is there any change in the ESOP charge trajectory, which was INR 200 crores this year and INR 100 crores next year. Is there any change to that road map?

[Yashish Dahiya, executive]

So ESOP should flatten out and maybe somewhat come down. That's the easy part. On the operating investment, I think it will be a mixed bag because see, we also have incentives for people. And so as the business grows, hopefully, the incentives will also grow. And I always say incentives is a good thing not a bad thing. However, there's always a wastage. And I'll explain what that wastage is.

See, when you have new agents in the first 3 months, they are not able to do a lot of business. And that is their training time, hiring time, training time, and they have costs involved in that. I think in the second half, you will see much less of that. And that was demonstrably at scale in the last 2, 3 quarters. So I think that delta, that vintage -- the benefit of vintage, you will receive. However, it won't be like absolutely flat. Obviously, in season, we hope something great happens in season from a business perspective.

[Rasleen Kaur, executive]

We'll take the next question from Suresh Ganapathy. [Operator Instructions]

[Suresh Ganapathy, analyst]

Yes. Yashish, so first, I mean, on this PB Health again, I know a lot of discussion has been done. So is this entity already set up, the construct of the entity is clear or that will evolve with time? I mean who will be the partners here and all those sort of...

[Yashish Dahiya, executive]

No, nothing is finalized yet. Yes nothing is finalized yet. There is no entity set up. There is -- nothing is finalized yet.

[Suresh Ganapathy, analyst]

Okay. So how have you guys arrived at the fact that this will contribute 5% more growth? I mean you will have exclusive arrangements as a broker to sell? Or how did you arrive at this 5% number? I know these are ballpark numbers, but then what is the thought process of arriving at this 30% revenue?

[Yashish Dahiya, executive]

I'll explain. See, if the customers experience improves. Today, I would assume you would agree that claims is a pain point in the industry. Would you agree with that or not?

[Suresh Ganapathy, analyst]

Yes. Yes. Yes.

[Yashish Dahiya, executive]

Sometimes, it takes people up to 6 hours, and the claims -- what is the insurance company trying to verify at the point of claim when it is giving an approval to the hospital. First of all, insurance company has to give an approval to the hospital. What it's trying to verify is, what did the customer declare in his proposal form? So okay, so I don't go into the long story. I think we all get it. Basically, the idea is if claims experience becomes better, the industry would grow faster. We, as a part of the industry, will obviously be a beneficiary of that higher growth of the industry.

What I expect is if the claims experience becomes better, the industry to itself grow at 5% faster rates over a 10-year period. And maybe because Policybazaar is involved, it could actually do much better than that. But yes, I think 5% is a relatively straightforward, and I would say a low forward assumption to have over a 10-year period for the expected growth, one could receive if health care -- if basically claims process was to get streamlined. So I think that is what is driving it. It is not a very scientific why 5% and why not 7% or 3%.

[Suresh Ganapathy, analyst]

Yashish, 5% for a $100 million investment is a complete bargain. So my point here is, I don't think you can do away with a $100 million investment. So if you're so really convinced about the venture why not go whole [ login ]. mean $100 million is not going to give you a 5% growth for a long period of time, right? I mean the commitment should be larger if that's the case. Otherwise...

[Yashish Dahiya, executive]

I'll explain. I'll explain. Policybazaar is not one's questioning what will be the profitability of this venture? It's not a financial investment for Policybazaar. Whether that investment works or does not work financially is not really Policybazaar's major concern. Other investors who are coming into it, for them, it's a concern. But for Policybazaar, that's not the concern. Policybazaar is investing in it to enable the venture. If the venture requires x amount of investment, Policybazaar is saying, I'm here to support it.

Policybazaar is also there to provide it aerial support in terms of customer evangelizing that, look, this is a good thing, right? And Policybazaar has a great role in that. Today, a very large percentage of customers who purchase health insurance come to the Policybazaar platform. So it can be a very big evangelizer for this. So I think Policybazaar benefits this platform and this platform benefits Policybazaar.

Now this platform actually does not care whether Policybazaar makes money. And Policybazaar does not care whether this platform makes money, but they both benefit each other sufficiently that these ties make sense. So this venture -- the investors in this venture, by the way, are interested in Policybazaar having an equity stake in it, not for the money, but because Policybazaar's involvement is important for them because it has a huge steerage role, right? And they want some skin in the game from Policybazaar to make it. So Policybazaar is playing an enabling role, And this venture is helping.

So I think it is -- it works on both fronts, and I agree with you. It would be a big mistake not to do this. I totally agree with you. But once it is set up, this venture has to take care of itself, whether it does an IPO, whether it raises money from other investors. But once it establishes its own credibility, it's like in a way when Info Edge invested with us, of course, that is not an operational partnership. After that, Info Edge was not responsible for our future. After that, we were responsible for our future. And similarly, the management of this venture will be responsible for its future, not Policybazaar.

[Suresh Ganapathy, analyst]

Okay. And then what are the rough time lines you believe by which this entity can be operational and official, could take another 12 months? Yes.

[Yashish Dahiya, executive]

I would hope before the end of this financial year. That's a hope. And that's what Policybazaar would want to happen, but it takes 2 hands to clap. The other party also has to be willing -- the other parties also have to be willing.

[Suresh Ganapathy, analyst]

Yes. And your annual free cash flow would be how much, I mean, for what you're expecting for FY '25, roughly?

[Yashish Dahiya, executive]

FY '25 should be about maybe $60 million. But next year should be more than $100 million -- yes, so '26 should be more than $100 million.

[Rasleen Kaur, executive]

We'll take the next question from Preethi.

[Unknown Executive]

We are out of the time right now, it's already 9:00. We want to continue because there are a lot of questions we can see. So maybe we'll extend by another 15 minutes, if that's okay.

[Yashish Dahiya, executive]

Sure. Preethi please go ahead.

[Unknown Analyst]

So my question is again on the stage of growth that we are. So the health industry, if you see the retail health industry is growing at 18%, and we are growing almost at 3x plus. So how do you think of this math because I think we had a broad thumb rule when we were going public that if the industry is growing at 15%, we should at least grow 2x given the accelerated online penetration? So what is happening, I mean, right now? And this is happening at a time when the lives in retail health, I think that growth is actually quite muted. So could you help us understand what factors you would attribute this super normal growth to?

[Yashish Dahiya, executive]

Sure. See, I think Preethi, we are a large advertiser in this category. We have been evangelizing this category. I think in the last 17 years, if you ask customers who has been educating them about health insurance and term insurance, it is Policybazaar and that stands out, right? I think -- and we are somewhere reaping the benefits of that.

To a large extent, we have done the right thing, good disclosures, which means a profitable business for insurers with decent claims ratios. So on the whole, I call it karma is kind of coming to roost, where we are benefiting from that karma. But in addition to the past, there's a huge amount of effort that's gone in the present, which is the feet on the street, which is the new products that the team has been working on, which is the [ claims assist ] platform that we have built.

And I think what we are encouraging in the health side is just another thing in that same direction to make the -- if you really think about it, if you take Policybazaar out of the equation, assume Policybazaar, you just simplistically just subtract it from the entire industry. You would see a steep decline in the lives covered in health insurance.

So I think there's something good going on because now it's been consistent. For the last 4 quarters or so, we have been growing at a steady rate and now growing on growth. And we hope it continued.

In car, we have started the Assured Delivery Program, which is also working well, where there are tie-ups with garages where the -- the time line for the customer is reducing and the cost for the insurance company is reducing. However, the biggest benefit to the customers, he's being informed all the time what is happening to their car. Is their car in the garage, is their car repaired, is the car ready for delivery?

And I think the customer just wanted that feedback, that engagement. So Policybazaar is stepping out. So we're a strong operations company. I think Sarbvir and his team have done a phenomenal job on the operations strength, and it does not take one thing. I'm sure if we cull out each of those things that we have done, we will come back to 0 growth. But -- not 0 maybe 20% growth. But a lot of the additional growth is coming because of the extra things we are doing step by step. And there's multiple ones of them.

In the term insurance, we're doing an Omni relief program. In health, we're doing in-hospital assistance. So there's lot of stuff that we're doing.

[Unknown Analyst]

So where would our current retail health market share be?

[Yashish Dahiya, executive]

Yes, we -- it is growing, that's enough. I think it's difficult to say exactly. I think the retail numbers are out there, right? So -- and our numbers are out there. So if you take the overall percentage, we might be -- I don't know, 10%, 12%. If you take renewals into account. If you take just fresh, we'll obviously be much higher, but let's leave that is becoming -- it's becoming embarrassingly high.

[Unknown Analyst]

I was just asking on the new business.

[Yashish Dahiya, executive]

Sorry, was that?

[Unknown Analyst]

Only on the new business.

[Yashish Dahiya, executive]

Yes, it's embarrassingly high. So let's leave it. I think calculations everybody can do -- everybody can do calculations here. So you know what our new business is. I would say just let's drop it. It's quite high.

[Rasleen Kaur, executive]

We'll take the next question from Nidhesh Jain.

[Nidhesh Jain, analyst]

Just one question. Can you share contribution margin in credit business and EBITDA margin for the credit business for the quarter?

[Yashish Dahiya, executive]

Yes, we are not breaking out the businesses for confidentiality reasons between credit and insurance from a contribution and profit standpoint. On a contribution basis, they are similar. On profit, obviously, insurance is higher. But on a contribution basis, they are similar.

[Nidhesh Jain, analyst]

Sure. Sure.

[Yashish Dahiya, executive]

Yes, they're actually same on contribution basis.

[Rasleen Kaur, executive]

We'll the next question from Yash Gandhi.

[Yash Gandhi, analyst]

I have two questions. First one is that our contribution margin is 27%, right, for Q2 FY '25. So, I mean, by 2026, do we expect this number to substantially increase to, let's say, 45% and then over a couple of years to 60%?

[Yashish Dahiya, executive]

We haven't done that much math. Maybe Rasleen can try and answer, but yes, it will inch upwards. Yes, over time, of course, it will inch up because of renewals. Renewals is an 85% margin story. So renewals will continue to make your margins inch up. And the past year of growth, whatever else it may mean for future new business growth, the one thing it does imply is renewals growth in the future because that is obviously -- this new business that we have done will play up there. And this new business has meant depressed. See, when we sell new health once again saying we make 0 margin. All that margin comes in renewal. So yes, you will see margin improvement into the future.

Exactly how much, I...

[Unknown Executive]

Yash, we don't optimize for contribution margin percentage number. And as Yashish said, the mix of new and renewal can really have a big impact. Just assume that if we grow at 60% new business versus 10% new business growth. Obviously, our renewal percentage would be very different in that particular year, and that would directly flow down to the contribution margin percentage. So whole effort is how do we grow faster the new business. That's the P1 for the company, and that's the main focus for everyone.

Renewals is more of a process that has to be managed in an efficient manner, and that has obviously a huge, huge impact in terms of what our contribution flows down. But we're not optimizing for the percentage -- accountable margin percentage. And renewals are the highest percentage they've ever been. So renewals -- and we track it at a very granular level, R1, R2, or R3, all that kind of stuff. They are the highest percentage they've ever been, all of them in numbers and in premium.

[Yash Gandhi, analyst]

Sure, sure. Got it. And I'm sorry, I think I missed the initial commentary. I don't know if you've given any sort of guidance on your premium growth for the next 2, 3 years?

[Yashish Dahiya, executive]

30%. That's always been our guidance that over a 3-, 4-year period 30% fresh business growth.

[Rasleen Kaur, executive]

We'll take the next question from Sanketh Godha.

[Sanketh Godha, analyst]

Yashish, when -- maybe next year when you'll start PB Health, is it fair to assume that you and Alok will take active executive roles there? And probably you will be more nonexecutive Board guys at PB Fintech. And that's the way the management movement will happen?

[Yashish Dahiya, executive]

We don't know as of now. And I think -- I would say we've taken too many questions on PB Health already, but we don't know at this -- at this stage, we don't know.

[Sanketh Godha, analyst]

Okay. And just an adjacency to that point, I mean if you make INR 800 crores of investment or INR 850 crores of investment in PB Health, so the cash on the books of PB Fintech will come down. So is it fair to assume that your other income will take a hit on the INR 1,000 crore profit guidance which you have given in [ '27 ] still will remain intact?

[Yashish Dahiya, executive]

Yes, the guidance will still be intact.

[Sanketh Godha, analyst]

But other income potentially can come down.

[Yashish Dahiya, executive]

It would. It would. That is absolutely correct. But it could, not it would. It could. If they Board approves this, it could. You're spot on, but factored that in, we will still be fine.

[Sanketh Godha, analyst]

And lastly, a data keeping, just trying to confirm the numbers on premium data. So the new business premium for the core platform is INR 2,060 crores and renewal is INR 1,860 crores, that's the right number, right?

[Yashish Dahiya, executive]

Approximately, yes.

[Sanketh Godha, analyst]

And your PB Partners is INR 1,085 crores, is the right number? And corporate is INR 189 crores and Dubai is INR 253 crores.

[Yashish Dahiya, executive]

Absolutely. Spot on.

[Rasleen Kaur, executive]

We'll take the next question from Srinath.

[Srinath V., analyst]

Naveen, wanted to first understand in the secured business, what kind of products are we doing? How does the fulfillment work? And given that there has to be a document identification and so on and so forth? If you can help us understand how that works, that would be great.

And for Sarbvir, wanted to understand how conversions are playing out from upper funnel in health? Clearly, the growth indicates the conversions have gone up. So qualitatively, if you can help us understand how rate of change of conversions is playing out. Again, qualitatively, if you can help us understand if it's across the platform or certain cohorts are doing better, that would be great.

[Yashish Dahiya, executive]

Sure. Naveen?

[Naveen Kukreja, executive]

On the secured business, currently, home loans is our major product followed by LAP. We are doing 2 experiments in smaller products. which is loans against car and loan against mutual funds, but they're very, very small.

We are -- from a fulfillment perspective, we are focusing on top 3 cities, which are -- which is about 30% of the overall industry, which is Delhi, Bangalore, Bombay. We are setting up the fulfillment teams there. And you're right, of course, there is extensive documentation and a back-and-forth process, which is why we believe that adding fulfillment in FOS would add to the overall funnel and will pay for itself as things stabilize. It's still kind of early days for us, but we stay through the customer through a longer gestation period of secured loans in terms of collecting documents and assisting the customers and connecting both the lender and the consumer.

[Yashish Dahiya, executive]

Sarbvir.

[Srinath V., analyst]

Yes, that means we would have a feet on street here, right, to fulfill similar to what we have in Policybazaar?

[Naveen Kukreja, executive]

Exactly. So we mentioned some of the numbers that we have about 130, 140 people already on the ground. We think this will go to about 300 in the next few months.

[Sarbvir Singh, executive]

On the health conversion side, yes, but definitely, conversion is going up. I think, Yashish, covered the reasons broadly. We are getting more inquiries. We have better products on the platform. We are able to offer the customer a choice, both in terms of language. So our regional language capability has significantly improved in health this year. We have feet on street, which has expanded again more cities, better depth, better trained manpower.

Even on the call center side, I think the way we are segmenting the customers, et cetera, is leading to much higher conversions. And then I think most importantly, the confidence that the customer is getting, that Policybazaar will be there when the claim is serviced. I think is finally tying this whole sort of cycle back. So the funnel is complete because people are getting to hear about these stories that their friends, their relatives, somebody they know has been helped.

And I think it takes time. See, this is a very, in my opinion, we are just getting started. And I'm very confident that with the quality of work that the team is doing that next year, this will even further build because people are seeing the concerns that they have with health insurance being handled by Policybazaar. And I think this is a very heartening initiative and result.

[Srinath V., analyst]

Sure. Sarbvir, would you be able to substantiate -- explain a little more on this regional language bit? That would be helpful.

[Sarbvir Singh, executive]

Yes. Regional language, now we speak in, I think, 13 languages. We have the capability -- we have the technology to guide the call to the right person in terms of which language the customer would like to speak in. We have the ability to transcribe calls. We have the ability to then go back and service the customer in that language. See, the most important thing is it's not just about sales. It's also about service. So I bought speaking in Malayalam, then you must service me in Malayalam also. So we're not able to do that. And it's an incredibly hard thing operationally to keep managing this cycle because then renewal, you have to make sure that the renewal happens in that language. So it's a capability that we are building. And I think it's still -- we are evolving, and we're learning in that.

[Yashish Dahiya, executive]

I just wanted to kind of answer the previous question where I think Sanketh had asked about executive, nonexecutive and all those kind of things. I wanted to be crystal clear, but I don't want to be wishy-washy about it. See, you have to at least -- and Alok, if he wants to speak to can speak for himself. You have to understand at least me as a person.

One person -- 1 investor just called me happen about 3 months ago, and said listen, I think for corporate governance, it's better if you are not on the Audit Committee and straightaway, I requested Alok that please get me off the Audit Committee and I'm off it. Like, all I'm trying to say is we are always trying to do what is right. Sometimes we just may not know what is right or wrong, right? So that is where we sit from a heart perspective. Sometimes -- this is the first time we're running a public company, and I'm not very experienced at running these.

Now the second part I wanted to mention was, deeply passionate about solving this particular problem of social security for the middle class. There is no other reason we run this company than social security for the middle class. What role we play in whether we are Chairman or Vice Chairman or Executive, Nonexecutive, outside the company, inside the company is just going to keep changing from time to time. But if you tell me something else needs to happen, I'll do that also because our intent is not wrong here. The intent is very clear that India middle class must have social security, and that's the only thing that keeps us kind of going and running to office every day, right? I don't know, Alok, if you want to add anything?

[Alok Bansal, executive]

No, I think, Yashish, has covered it because we obviously, however, try to build it outside here. But if we're deciding not to do it outside, but internally, where the commercial outcome is not going to be as great if we've done it outside, there has to be a reason. So you have to look at the intent of the company and the things that usually drives us. Just think about it. I mean, we moved our ESOP from a par value to market value last year. There was no specific force driving us. But because we heard from the shareholders that was the right thing to do, so we just did it.

So you'll find multiple times that the value system and the ethos of the company and the management, they are very, very aligned with solving for a very large and hard problem and super focused on that. Now as Yashish said, whether we do it here, there, it doesn't really matter till the time problem is getting solved. And eventually, yes, PB Fintech and Policybazaar is growing towards that.

[Yashish Dahiya, executive]

Sorry. Any other question or we're done?

[Rasleen Kaur, executive]

We'll just take the last question from Rahul Jain.

[Rahul Jain, analyst]

Just wanted to understand, of course, this has been touched in a certain way, but still making an attempt. So is there a way to understand what kind of overall volume or exposure we could help resolve through our health -- new health initiative directly or indirectly to -- for us to kind of make that efforts?

[Yashish Dahiya, executive]

Sorry, I didn't understand the question. Honestly, I did not understand the question.

[Rahul Jain, analyst]

So let me try to rephrase that. So what I'm trying to say is that you explained why of investing in this PB Health initiative. So I'm just trying to understand because there is a reason which is -- which seems pretty fair. But what kind of volume or exposure you could probably directly or indirectly address the problem?

[Yashish Dahiya, executive]

Yes. I think from a Policybazaar perspective, we have said that the exposure that we as a management would take to the Board is between $0 million to $100 million. The Board might shoot it down. The Board might say, no, it's going to be $0 million, right? We don't know. But at some point, we would like to go to the Board once we have an understanding from other partners what we need to do. We would like to take to the Board something between $0 million to $10 million as an investment opportunity, and that's the upper limit of the exposure.

All I wanted to clarify is whoever else is the other investors in the entity know that, that is the upper limit, like I'm saying it here, right, so they can hear it, that that's the upper limit of PB Fintech's exposure. Now, situations may change in the future, but I don't anticipate any of that, right?

Now the second part, the benefit also we've quantified that we expect a minimum over a 10-year -- like, I don't know, right? We expect some benefit in terms of higher premiums. If you ask us to quantify, yes, we think we should be able to achieve 5% higher premiums. Now as I said, whether it's 3% or 7%, we can't really tell. My view is 5% is really underballing it because it could be much higher. Now let's see. Let's see what happens if it happens. And I want to say it's an if, right? It hasn't happened yet. It may not happen, and it may happen.

[Rahul Jain, analyst]

And is it safer to assume the benefits would be much, much long ended as this stress factor would get resolved only over a period of time, right?

[Yashish Dahiya, executive]

So I'll explain one very simple thing. If this was a 5-year project, there's no point even doing it. This is a very long gestation project. It is at least a 10-year project. And the -- that is the negative of it. Even from a public market investors perspective, we see some benefit, 1%, 2% in the next 5 years, but you will not see any significant benefit to anybody in the next 5 years. Now it may happen sooner. But I think it's a very long gestation period. That's a negative of this product -- project.

The positive, it can have a very big impact, very, very material and very big impact. But yes, the long gestation project, and it does have upfront investment compared to most others.

[Rahul Jain, analyst]

I appreciate your vigor to solve the insurance problem from every angle possible.

[Rasleen Kaur, executive]

I see a lot of people have still raised hands. I would request you to please send your questions at [e-mail]. We will try to answer them as soon as possible. Thank you all for your time and see you next quarter.