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PB Fintech Ltd
Earnings Call Analysis
Q3-2024 Analysis
PB Fintech Ltd
PB Fintech Limited, in its Quarter 3 Financial Year 2023/2024 earnings call, delivered an optimistic message as it announced achieving a full-year Profit After Tax (PAT) breakeven earlier than anticipated. Originally expected for the financial year 2024, the company reported a PAT of INR 37 crores for Q3, transitioning from a loss of INR 87 crores in the previous year - a notable delta of INR 125 crores.
Spearheaded by its online marketplaces, Policybazaar and Paisabazaar, PB Fintech's growth surged by 39%, reaching INR 593 crores in revenue, aligning with previous IPO projections. The adjusted EBITDA has improved by INR 50 crores for the quarter, in line with INR 150 to 200 crores annual growth guidance. Such consistent performance underscores the company's reliance on its core businesses as a growth engine.
The health and term insurance segments soared with a 44% year-over-year growth, evidencing the company's deepening foray into high-value insurance offerings. PB Fintech's total insurance premium reached an impressive INR 4,261 crores for the quarter, setting a strong annual run rate that reflects the company's sustained momentum in this domain.
The credit-linked revenue climbed to INR 145 crores, and the company highlighted its keen focus on renewals and trail revenue with an annual recurring revenue (ARR) of INR 454 crores. This strategic emphasis on multi-faceted revenue avenues, particularly those with high operating leverage, bodes well for future financial stability.
While maintaining a robust customer satisfaction rate, PB Fintech continued to drive cost efficiency, with no significant abnormalities in expenses reported. The noted reduction in selling, marketing, and employee expenses were part of a normal schedule. The company has increased headcount, suggesting ongoing investment in its human capital.
The company has made substantial advancements in digitization, with 75% of its card processes now handled end-to-end digitally. Moreover, the outreach of their agent aggregation platform, PB Partners, has been notable, catering to over 17,000 pin codes nationwide. These expansions signify PB Fintech's emphasis on scalability and market dominance.
Despite a temperate view on credit business, expecting a 10% lower growth in the forthcoming quarter due to external regulatory guidances, the company confidently plans for a resurgence to normal growth rates shortly thereafter. The overall tone conveyed a company, although momentarily bracing for a slowdown in one sector, remains undeterred in its pursuit of long-term growth.
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Good evening. And a very warm welcome to PB Fintech Limited Earnings Call for Quarter 3 Financial Year 2023/2024.
Today, we have with us Mr. Yashish Dahiya, Chairman and CEO, PB Fintech; Mr. Alok Bansal, Executive Vice Chairman, PB Fintech; Mr. Sarbvir Singh, Joint Group CEO, PB Fintech; Mr. Naveen Kukreja, Co-Founder and CEO, Paisabazaar; Mr. Mandeep Mehta, Group CFO, PB Fintech.
I will now request Yashish Dahiya for the introductory address.
Thank you very much, Jasleen. Before I start, I know this is our investor communication, but I just wanted to take 30 seconds to really thank our team for -- in every area doing much better than the market, is much better than the industry is. And obviously, I want to thank the current and the past team because, obviously, everything is building on top of works. And as I interact with our team, I cannot but feel the sincerity, the patience and the trust that each member demonstrates in building the business every day. Thank you very much.
Coming to the results. We had aimed for a full-year PAT breakeven in the financial year 2024. And very happy to announce that we've already achieved that within the first 3 quarters with the strongest quarter yet to follow. This quarter, we were at a PAT of INR 37 crores plus, which is a 4% margin, up from a loss of INR 87 crores. That's INR 125 crores delta.
For the year, that makes us PAT positive and about INR 4 crores of PAT, a swing of INR 482 crores from last year. PAT for the same period seasonally strongest quarter yet to come. So our revenue for Q3 was INR 871 crores.
Now for the core business marketplaces, the online marketplaces, Policybazaar with Paisabazaar, which we refer to as core businesses. Our growth is 39%, and we've grown to INR 593 crores in revenue. Our adjusted EBITDA has improved by INR 50 crores for Q3 '24. This is very much in line with the guidance that we provided at just after IPO, that look, our adjusted EBITDA will keep growing at INR 150 crores to INR 200 crores every year. For the last 6 to 7 quarters now, we have every quarter grown by more than INR 50 crores. So that means overall, the adjusted EBITDA is growing at more than INR 200 crores every year. And that happens on the back of revenue growth.
So just to shoot on that. As I look at for the first 9 months, the revenue growth of the business, that would be about INR 500 crores, of which almost INR 170 crores would have flown all the way down to the adjusted EBITDA line. And I think that's the strength of the business that with scale, there is operating leverage. And there's a renewal piece with obviously much higher margins.
We are very pleased with our health and term insurance businesses, which have a bulk of the long-term value. We witnessed a 44% Y-o-Y growth. And I just wanted to clarify, within this, health is almost 20% higher than this. So health has shown a much higher growth than term.
Our total insurance premium for the quarter was INR 4,261 crores, which is now at INR 17,000 crores ARR. It started to give us good scale. If some of the people have recollected, our view was that when the year '27 hits, we should be about INR 35,000 crores. At that time, when we made it, we were much smaller. So it looked like a large number, but now it's starting to be very real.
Our growth over the last 2 years is about 2.5x. So over the next 3 years, getting to 2x does not seem like a very big task. Out of INR 593 crores revenue for core online business. Credit-linked revenue is INR 145 crores. Our renewal or trail revenue ARR is now INR 454 crores, up from INR 317 crores. And this is the part that operates at a very high margin and obviously contributes towards adjusted EBITDA. We continue to improve our customer onboarding and claim support services and maintain insurance CSAT of 88%.
While we disclose 88% and whatever we actually measure is in decimals, and do appreciate it's very difficult to change this in decimals because it's now from 88.4% to 88.7%, et cetera, et cetera.
Credit business growth has sustained well. However, we are expecting a 10% lower growth rate. So please appreciate, right? If we were expecting 40%, we would expect 30% growth in this business. For perhaps the next quarter, and we expect it to come back to normal growth after that. This is to do with the unsecured credit part where RBI has put in some guidances, et cetera.
Credit business has been adjusted-EBITDA-positive since December 2022. Now I just want to clarify right here, right, we don't have any credit risk issue, or we don't have any issues of that sort. However, suppliers have tightened their logics. And getting new suppliers in their place, does take a bit of time. That's why the 10% growth delta.
We are now at an ARR of INR 14,000 crores disbursement and INR 5.6 lakh crores issuance on an annualized basis. Total credit consumer base is now 41 million. This accounts for 75% of the sales because it's mostly on communication with these 51 million people. 75% of cards have been processed end-to-end, digitally.
We continue to strengthen our leadership. If you recollect, after IPO, we really started investing in our new initiatives. We continue to strengthen our leadership there. Our new initiatives are now breakeven on a contribution basis for the last quarter. PB Partners, our agent aggregation platform, which is a bulk of new initiatives, continues to lead the market in scale and efficiency of operations.
We have moved the business increasingly towards smaller and higher-quality advisers with 56% jump in number of advisers using our platform. It has the highest proportion of non-promoter business and is present in more than 17,000 pin codes across the country, which is more than 90% of the pin codes in the country.
And we continue to see improving efficiencies in the business. In fact, I'm very confident we will see profitability in that business in the nearer term. However, in the same breadth, I would say that profitability or loss will always remain. Going forward, what we will realize is the core business profitability will totally dwarf both the profits and loss of the new initiatives. Our UAE premiums have grown at 2.4x. And I'm happy to take questions now.
[Operator Instructions]
We take the first question from Sachin.
Congratulations for a good set of numbers. I have 3 questions. First question is on your cost. Just wanted to understand should we look at this cost as a new normal? Or is there some one-off? And I'm generally asking from selling and marketing expenses, which are down on a Q-o-Q and Y-o-Y basis. And so are your employee expense -- I presume it's a factor of ESOPs going down. So that's where your employee expense have gone down. Anything else, which is largely reducing the total employee benefit expense?
There should be nothing abnormal in that. Our headcount actually increased by about 535 people. Our salary increased by about INR 10.828 crores. Our ESOP expenses are just as scheduled. We were overcharged near IPO, which is why everybody beat us up. And as the years go by, you guys will start asking us this question more and more that your ESOP charges are too low because they actually become too low. But that's just the reality of life.
And the ESOP charges will just keep coming down every year because that's just a schedule, right? So the schedule took about 45% of that -- of 5 years in the first year, then about 25%, and then about 15%. And finally, it will become about 4% by the fifth year, 9% and 4%. And every Q2 to Q3 is when this change happens, which is why I've been saying since pretty much when we did IPO that we will breakeven in Q3 because we always knew this charge is going down. So yes, that's -- it's a pretty straightforward thing.
Got it. Yes. And ad and promo expenses are...
No,no, nothing -- see, I would say we don't decide on our ad and promotion expenses in any way except what the market expects at that particular time. But nothing abnormal about them.
Sachin, I'll just add that you should look at our ad and marketing plus other expenses together, for a fair comparison versus last year. So if you do it that way, then you'll find that the delta is not as much.
But still overall, EBITDA or adjusted EBITDA, you see a big delta, right? At the end of the your quarterly costs have also...
I will make a statement there. If anything, our results compared to our actual performance, the way I read it is a bit depressed because when you look at present value results, which is how the management looks at our -- we've always looked at our accounts on present value just to explain to you, the present value looks at renewals value, add fresh business value and then evaluating our business versus current year stat results.
So the stat results, whenever we do more health business. And as I said, health has grown at least 20% more than our normal growth for the rest of the business. That puts a negative delta in the -- in our contribution simply because in the first year health, we make 0 contribution. While overall, our business obviously has 45% contribution. So more health we do in the first year, our contribution goes down.
So for the last two quarters, we have been, from a stat results perspective, it has been hurting us. So if it was -- if you normally -- is this, probably we would have had a 2% higher margin and a 2% of revenue as a higher EBITDA is what I would say. But yes, it's okay. Again, next year, we'll get the benefit of renewals. So it's fine.
Yashish, pretty clear on that. My second question is when I look at your core Policybazaar business, and generally look at how insurance business has grown on a Q-o-Q basis. Clearly, your fresh business has grown much faster than what industry has shown growth. So any color you could give in terms of, is it health? Is it ULIP something specific which is growing better as compared to industry?
I'll take that, Sachin, this is Sarbvir. Each of our businesses, I believe, has grown faster than the industry. And I think we have consistently maintained that, that is our goal also. And I think there are different, obviously, reasons. But if I were to cull out some common themes, I think one is the fact that our segmentation is -- every quarter gets stronger, so we are able to bring the right product for the right customer. And this is true in terms of savings and health.
And the second thing, I think, which is there is that as our customer experience has been improving and especially on the claims side, I think there is an element of, I would say, greater credibility that is getting established for Policybazaar, and that is helping our conversion. And finally, the quality of our business that we source because of the declaration, because of the risk control, et cetera, that we have, allows us, again, to produce better products and process because in insurance process also matters. So I think these are the 3 factors that are leading to growth being strong.
Very, very clear. And my last question is on Paisabazaar. And Yashish, well taken your comments in opening remarks where suppliers are tightened and we could see a 10% slower growth delta. But the key question is, how do you guys look at it? I mean is there something where you guys need to think that they're structurally different in the business now what it was a few years back?
And given how, let's say, Policybazaar has scaled up in a meaningful manner. Any general thoughts in terms of if you want to look to revisit some of the parts of the business from the next 5 to 10 years perspective?
No, absolutely. I will actually take that before Naveen takes that. So because me and Naveen have been discussing this for the last few months now. While we believe that the current business is strong and will continue to be strong, but since you mentioned from a 5-year perspective, yes, we are having a very strong review of strategy and figuring out which way do we take it. And hopefully, we will have more clarity on that as we proceed. But Naveen?
Sachin, on the -- I think what we are doing currently, and which is essentially credit and within that unsecured is a dominant share and credit cards. I don't see a fundamental issue at all. And if you look at any industry numbers, right, the level of under penetration, the household debt to GDP and then you look at the entire financial sector, in terms of where is the margin in the industry, whether it's banks or the NBFC, that's in the unsecured credit cards, and there is reasonably good demand.
There's been, of course, a recent guidance by RBI, which has led to a review of portfolio by various organizations. And we do see, like Yashish mentioned, we do see a short-term recalibration, which basically means a slightly lower growth versus what we would have targeted. So we were, for example, growing at about high 40s in the first half of the year, early 50s. We are still at about 36%.
Just to clarify one point here because it is a little bit misunderstanding. The smell we are picking up from our partners, it has nothing to do with the quality of portfolio than to do with complying with the fact that a regulator is saying there is an issue, so relook at everything. That is what is more driving that rather than anything else.
Absolutely. So what we do expect is that once the a little bit of recalibration happens in 1 or 2 quarters, things will come back. Of course, there's a pricing increase, which might sustain because the risk rates have increased. But we've seen over a period of time that given the demand supply gap still and under penetration, the demand is fairly price inelastic to a certain extent.
So don't see any concern from a long-term growth perspective on the strategy right now. We are looking at other areas like Yashish mentioned. It's a little early to talk about other areas before we kind of finalize our strategies.
And there are multiple directions we are thinking in. In terms of do we do this, do we do this? What has -- and we are obviously -- we are behaving like owners, right? So we are not just behaving like management. We are behaving like owners. So we are calibrating the risk reward and seeing what is the right thing for us to do, where we will achieve success as well. So yes.
We'll take the next question from Sachin Dixit, JM Financial.
Congrats on a great set of results, Yashish and team, and this journey to PAT profitability, I think, has been due for some time and we have reached there.
Coming to question. So while I do understand that -- margin in new business -- or sorry, the core business would have been a bit tepid, considering that health insurance accounted for higher mix. What drove the sharp improvement in new initiatives breaking even, right? It was at 9% loss last quarter. And what drove that shift?
It will be improving continuously.
I think, Sachin, If I could take that. See, in our new initiatives also we have been explaining every quarter that we have been improving the overall economics of the business. And one of the reasons that we've called out is that we are moving more and more towards retail agents. So having smaller agents who do smaller amount of business, but having more of them.
So if you see this quarter, the growth in number of agents is at 56%, which is fairly robust number. And secondly, as this shift has transpired, we have now reached a point where the business is generating contribution and slowly is going to start covering its cost as well. So that is the main reason. It's a -- in each of our businesses, I would say that we have been on a path, and that path continues every quarter and kind of is getting us there. So there's no like a sudden jump or a sudden change in anything. It's a slow and steady progress, having a robust retail-driven agent mix.
And I think when you shift your mix from, let's say, large partners to agents, it's expensive because you need to deploy people. You need to spend more in reaching out to people. You need to do all of that. But once you do it very rapidly, you see the benefits as well. So parts of it are cycles. So maybe last quarter, what you saw was we had done the right work, but the result was the bad result effectively, relatively.
So internally, in our reviews, we were actually very happy with the performance of the company -- of the new initiatives. But externally, when you look at the results, you may have felt it was -- there was not a significant improvement in the margin in the last 2 quarters, I would say. And then you saw the improvement coming in because that -- what work was done in the last 2 quarter, the benefit of it was -- has probably come through now.
And see, you guys have been hearing me. One year ago, you would not have heard me say very confidently that look, we're very confident that in this business, we will make profits. Now I am super confident. I'm not confident of the timing, but I'm super confident it's going to be some time in the vicinity of where we are, like few years, we're going to see it. I have zero -- and probably sooner than that. So very confident of the way we are taking the business. I think the biggest reason for that is, we're trying to impress anybody. We're doing it because we generally believe it's the right thing to do. And we have been taking to that retail direction, which actually has margins, which has margins and you can -- but this will never become very profitable. See, because the core business profits will start to now rise very rapidly. And even 20 years from now, this business will not give a huge amount of profit. It will give you a scale. So on that, we haven't changed.
Right. Yes, I was basically asking in context of last quarter only, and I think you clarified that the results did not show it. But in this quarter, we have seen the improvement.
So coming to core, right? And as you mentioned, you will get benefit of renewal in the core business. And core business, we have seen that the contribution margins are roughly stable around 44%, 45% for a while now. Where do you think these numbers can like plateau around? Can these be 50% upwards of contribution in core? Can we reach those numbers?
Plateau is very far away. And I don't want to talk about plateau. If you really ask me, honestly, I think plateau is probably at least 10 years away. So that would probably give you guidance of where we are going to head.
I'll give you some data points, right? And we also -- we don't want to talk too much about these things at this stage. If you look at the industry and you look at the fresh versus renewal mix of the industry, I think we're a INR 7 lakh crores, INR 8 lakh crores industry, of which fresh is about INR 1.5 lakh crore industry for everything put together, and I'm including all kinds of businesses, right?
For us, the ratio is 1:1. And obviously, the fresh margin is much, much higher. So -- sorry, the renewal margin is much higher. So obviously, we will also -- eventually when our growth comes down, we will tilt in that direction. Plus, we have a huge amount of future efficiency that is going to come from our operations, our marketing and various other things.
So I think they're very far away from a plateau. I think we've given guidance on our profit numbers till '27, et cetera. We are very confident of those. Yes, I think this will improve from here onwards. You're probably seeing the -- perhaps the lowest margin we'll ever have on a continuation basis.
Just one final question, if I can squeeze in, we saw Zomato recently...
I'll give you one data point to look at. Our incremental revenue and our adjusted EBITDA. Incremental adjusted EBITDA is 34% of the incremental revenue. That probably gives you some indication of the minimum that we can achieve. This is while a bulk of our new revenue is also health, like health is a little -- now, right?
Now it may continue to outperform for the next 3, 4 years. We don't know. I hope so because that is usually value accretive. If that does, then that does have some implications because it will also be then outperforming at scale. So if something is outperforming at scale and has 0 margins, then -- which is what new business of health is. Yes, it will have some impact, right? It will put some pressure.
Right, right. Just one question. In terms of ESOP side, as you mentioned, like your ESOP cost is going to decline sharply. Are you thinking of any segment ESOP then in the future, considering that Zomato recently did one, so...
See, we have given a guidance on this that you can assume, our long-term ESOP cost, ESOP charge to be about INR 100 crores, growing at maybe whatever inflation rate is. So let's say growing at 5%, 7% every year. But that is going to be our long-term ESOP cost.
Today, we are still at INR 350 crores. This year, we'll be at INR 350 crores. So significant reduction from where we are. INR 330 crores, it's okay, INR 350 crores, INR 330 crores, same thing. You know what I mean, right? But the point is, you know what I'm trying to say, right? INR 105 crores -- don't hang me.
But basically, that's the nature we are looking at. And of course, management needs to be rewarded. That's why I started by thanking the management, right? We can't not reward them in the future. So of course, we have to reward them. And I think INR 100 crore is sufficient to do that reward. Obviously, Alok and me need to be rewarded much less in the future. We were rewarded for the past. And we don't need to be rewarded in the future, Naveen also, because part of it was past, part of it is future.
So in future, everybody will get rewarded in a very shared manner. And I think that should be INR 100 crores a year, that sounds about right. We have done a lot of -- that looks about right. At the right time, we'll let you know also. But there's nothing more than letting you know it. That's basically what it's going to be.
So do remember in that INR 330 crores, me and Alok might be INR 160 crores or something or that sort. I don't know, right? So that automatically actually makes the real number INR 100 crores, INR 120 crores, whatever, already. So it's not very far off from where we are right now. So this year is actually a pretty good indicator of what our ESOP charges of long term will actually be because this is that median year in those 5 years where we are seeing what the average should be if you cut out the founders.
And there is a big difference here in terms of the excess value of those shares. In the past, we had given all the shares at the par value. Going forward, it will always be linked to market price. But I'm talking about the cost.
Yes, that the company will bear. So see, just to clarify on that, since Alok and I don't want any confusion whatsoever. And I want to be a very straight forward to indicator. There's a Black-Scholes evaluation to issuing stocks at par. And when I'm talking about INR 100 crores, I'm talking about the Black-Scholes evaluation of those stocks. And that's the real valuation. So that's okay. It's not a big deal.
We'll take the next question from Nidhesh Jain, Investec.
Yes. Actually, I have a question. The question is -- so the first question is on capital allocation. How do we think about returning capital back to shareholders, given that we have turned profitable, and we are already generating a significant amount of cash on a yearly basis?
We've actually started to think about it. We don't have any decisions yet. But yes, more and more conversations.
So we should hear something by the end of this year or...
I have no clue. You will hear once we've decided. We haven't decided, and we don't have a timeframe on deciding.
Sure. Secondly, if you can share the EBITDA margins of the credit business for the quarter?
8%. Yes. I know it. The Policybazaar is at 14%, this is 8%. The Insurance part is at 14%. Mandeep is holding his head. It's at 14% and 8%.
Sure. And just to clarify the Paisabazaar business. We are still saying that we should grow at 30% Y-o-Y in Q4 and next year?
Naveen, [ Foreign Language ] credit card business will grow at 30% Y-o-Y, credit business.
If you -- the industry, in my estimate, and again, a lot of external estimates also is expected to grow anywhere between 13% and 16% from a long-term perspective next 5 years. And we have, in the past, grown and always maintained that we, as a marketplace, who is totally digital, expect to grow or aim to grow at between 2 and 3x of the industry. So 30% to 40%, depending on macro sounds about right.
I would honestly be disappointed if we're less than 40%. But actually, we'll be at around 40%, but let's see.
Yes.
We'll take the next question from Dipanjan Ghosh, Citi.
We'll just move on because...
Yes. Shreya, we'll take the next question from you.
Congratulations on a good set of numbers. Sir, I have 2 questions. First is just data keeping. Can you help us with PoSP premium, Dubai premium, which I believe you have said is 2.4x Y-o-Y corporate premium, and the ESOP charge for the quarter?
And my second question is, sir, there is a current discussion in the insurance sector about this new regulation on surrender value and there are multiple things going on. One of the things that we've picked up is the ICICI Prulife launched a new product, an annuity product, where they've made -- where they are giving very high surrender, 100% refund, but they have made the commissions on a trail basis. So now that 2 of the most important products of this industry are undergoing some sort of structural changes, which may impact commissions also to some extent. So any view on this, that will be helpful for us to understand.
So first of all, on the numbers. PoSP is at INR 801 crores. Dubai is at INR 194 crores. Corporate is doing about INR 300-odd crores. What else do you want to know? Do you want to know the ESOP...
ESOP.
That's published, I think. INR 65 crores. I think Sarbvir should answer the question on the surrender values, et cetera. But I will make one little statement before Sarbvir comes in.
See, we have been asking the industry for a long, long time about having long-term payout mechanisms, which is what you are talking about, trail base, et cetera, et cetera, AUM linked payouts, et cetera. And we very much welcome that. We almost sell -- there are 2 types of products we sell one type, which is far more consumer centric. And so these are industry things I don't think we need to comment on. And there's lots of industry discussions that have bigger implications for other channels than for us. But on the whole, I think we should turn out quite okay.
No, no, of course. So just the corporate number is INR 365 crores for this quarter. On the surrender values, I think as Yashish said correctly, we -- Policybazaar always focuses to customer-centric products. So that's why if you see our ULIP mix is very high. We have been selling deferred annuities for a while. We are selling this I-Pru product. This is something that we totally believe makes sense for the customer. And we are very happy to be paid on a trail basis because it makes sense if we are -- if the customer continues, if the persistency is high, then we get paid more. And I think that's exactly what we want.
We want -- our quality of business should be rewarded over a period of time and rather than having to just talk about first year. So we are very much in sync with this change. Rest, I think, is an industry issue, which I think is a complex issue, I would just say. And I think I'm sure industry is working towards it. Nothing has happened yet. So I just want to clarify, on the surrender values, nothing has happened yet. It's a discussion point. And -- but I feel that we are on the right side of it.
Got it, sir. So my question primarily was around the I-Pru product, which is going to be on a trail basis. Are you suggesting that you already are selling that product from your website?
Of course. Of course, yes.
Yes, absolutely. We are already selling it, and we love that product.
We take the next questions are Madhukar from Nuvama.
Congratulations on a good set of numbers. I have a couple of questions. First on the data keeping part. Have you spelled out the renewal premium for the quarter and for 9 months? Because maybe I've missed it.
Yes, yes. Renewal premiums are -- for the 9 months are about 5,900 and 4,700. So 5,900 new, 4,700 -- 4,800 renewals, 5,900 -- so basically almost 6,000 new and 4,800 renewals. And for the quarter, it is about 3,400 and about 1,900. It's in that range.
Right. Yes, yes...
Sorry, 2,400, not 3,400.
Yes, 2,400 and 1,900.
I wish it was 3,400. It's 2,400.
And in your opening remarks, you had also given the credit business revenue. Was that INR 144 crores?
INR 145 crores.
INR 144 crores, okay. Now coming to -- when I look at the ARR for the insurance business, on a Q-o-Q basis, it's at about INR 359 crores versus, I think, what, INR 345 crores last quarter. So my sense is that this number should have probably grown faster. So are we seeing some stagnation or some higher...
I'll explain. We have -- at some level, we'll either have to take all the analysts through a deep session on this or you'll have to just trust us on this. So we've done the analysis. See, there are multi-year policies whose proportion keeps changing from year to year. And last year was higher than this year on muti-year policies.
And the second thing is last year, our health insurance growth was low. And thus, you are seeing the impact of both multi-year and the lower growth in this year. This year, the multiyear is lower than last year, and the growth is high. So next year, you'll see a different account.
I just want to clarify, and you can't look at this quarter-on-quarter because our renewals this quarter had nothing to do with our renewals last quarter. Last year, it was INR 280 crores. For insurance it's INR 359 crores, which is lower than what would have happened if things were exactly the same. Like in the sense last year was perhaps the lowest growth year for health in the last 5 years. This year is probably the highest growth year for health in the last 5 years. So that is basically what's playing out a bit. But -- and there's a multiyear part, which is it was higher last year.
But we can -- all I can assure is that we have done deep dives on this, you can appreciate, right? This is a bulk of our value, and we do deep dives on this. I think -- here, I'm very happy to kind of, at some point, have an analyst session and take you guys through how things look, maybe Rasleen can do that. But we have done it. And we have -- I've obviously spent a huge amount of time trying to understand renewals and things look better than the past. So our renewal rate is actually better than they've ever been.
Got it. We get the adjusted EBITDA margin on the credit business like you've just given that? And if 85% is the margin on the renewal revenue, then if I just do some rough calculation, it suggests that the new business that we write, the adjusted EBITDA margins would be sort of negative even on the core platform business. Am I right or am I going wrong here?
No, no. You will be right, but you cannot look at it that way. In health, the new business is only 20% of the net present value.
Largely because of health, that means?
Yes. So health makes up -- no, no. But even in the other products, there is a 15% extra that comes because of renewal business, right? So I don't think you can go that way. In health, I'm telling you on the new business, if you look at it, we'll have a significantly negative EBITDA margin. At the contribution itself, it is zero, right? So by the time we get to EBITDA, the EBITDA has additional costs, right?
So you cannot look at it that way. A lot of people have tried to look at it that way. That's like looking at the bogie is running without the engine. You're saying if the engine runs alone, it will make a loss. Yes, of course, it will make the loss because there'll be no bogie that it's carrying, but the engine is supposed to carry the bogies. They are a parcel of it. The bogies can't arrive without pain. I cannot get renewal business without fresh business.
So how -- you realize my effort in doing the renewals business is negligible, but I cannot get it without doing the fresh business. And that is the biggest issue we've had with NPV. For the last 15 years, I've been explaining to even our pre-IPO investors every time. They said that health business is a loss-making business because, obviously, they're used to look at the fresh business, they say, why are you doing this business. You won't be -- everybody is very professional in this whole thing.
So obviously, it's a fairly profitable business, but it comes from adding up the renewals, the NPV, at an NPV basis, you'll get about 2.7x.
Yes. I get that. I get that, Yashish. Just wanted to get like this is primarily because of the health business, the...
And the second thing you're looking at it at the EBITDA level. You're not looking at the contribution -- you got to look at the contribution level.
Then look at the contribution level...
At the EBITDA level, you've got the cost of me, Sarbvir, Alok, Mandeep, everybody -- yes.
And let's say if I were to look at the contribution level, then apart from the health business, are there other lines in the insurance that would be a negative contribution -- sorry, or 0 contribution?
No, no, nothing else. Nothing else.
Nothing. Only health would be 0?
Health, on a first year basis. See, okay, so let me explain so that this is very clear. Our NPV to direct cost in health comes out at whatever, let's say, 4x, right? I'm just making that up. Let's not get into the exact number. Let's say it's 4x, right? But my revenue collection divided by NPV is only 20%. So you've got 20% divided by 25%, which makes your first year revenue divided by direct costs, 80%. And that means we actually made a loss in the first year. That cannot be a decision-making factor, right? That's pretty close to what the reality is.
Got it. But that's true only in health is what I'm saying. Because even on the first year would be contribution positive or...
The way we look at it, health has a very high NPV by first year revenue. Others do not have that significant a gap, right? And most of general insurance will be about 1.6 and life insurance about 1.1, 1.2. But health has multiple fold. So you're absolutely right.
We take the next question from Nidhesh, Investec.
My question has been answered.
We take the next question from Varun, Kotak Securities. .
So I had a question regarding the take rates. So if you look at the revenue, it has grown by 7% quarter-on-quarter, while premium was up 23%. Obviously, there has been some decline in take rate, but how much of this is this is because of the trail-based commission? And are there any other things that are playing out here, like higher UAE business?
Our take rates by business are largely stable. There was a mix shift. We did more savings business in Q3. So that was one of the reasons why the take rate will optically look -- or is lower, I shouldn't say optically, it is lower.
The second thing is within the savings business also, as you must have seen in the industry, ULIPs are doing much better than other products. And for us, ULIPs are always been a big portion of our business, and they have become bigger. So that, again, has some implication for the take rate. So the main reason is the fact that savings has done well. And within savings also, we've sold more ULIPs. So that is main reason. Other than that, every other line is the same in terms of take rate versus last year and last quarter.
Our payments don't change.
Our take rates don't change too much. But in the savings business, year-on-year, not quarter-on-quarter, but year-on-year, there is a higher percentage of ULIPs. And the second part is on the quarter-on-quarter. In the first half of the year, we were growing -- our savings was growing slower. In the second half of the year, the savings seems to be growing much faster.
Okay. And with regard to the, what you call, competitors. So my guess is not going -- done much progress. But recently, there's been some news about ONDC starting to distribute insurance products. Do you see any competition increasing on that line?
We welcome all government efforts to increase insurance penetration, and we support all of them. I think our job is not to just grow Policybazaar. Our main mission is to grow insurance in the country. And I think all these efforts by the government expand insurance in the country, and we are very, very supportive of them. Yes, I think it's just that simple. And we would like to see them all succeed.
We'll take the next question from Rishi, IIFL.
Just one question, firstly, on the PoSP business. How has the economics changed in it over the past, say, 4 to 6 quarters in the sense, especially on the payout side that we end up paying to the agents versus what we are able to get from the insurance companies? And has the change in regulations around AUM played any kind of role in that?
Rishi, I would say that largely, the dynamic is the same. I don't think the dynamic has changed a lot. There are a couple of people who are very active on the consolidator side who have raised capital and they are spending a lot of money on the consolidator side and trying to buy business over there.
As I have told you earlier also, we are focusing on the retail side. There, the economics are better. And again, we have to invest against that because you have to deploy people, you have to deploy technology, product, et cetera. So we've been doing that. And I think this quarter, the results are showing. AUM generally helped everybody because it has made everything simpler and clearer. And I think that has helped us also. And we are a 100% compliant organization. So unlike some players in the industry, we don't do any of the other stuff.
I was just thinking, right, because all of you guys look at -- and this message would even be to the private investors. One of the things that people can look at in order to see if the companies are doing genuine PoSP or some kind of consolidation business, or some kind of large consolidator business, is just look at premium divided by employees. Nobody can do too much magic different from each other.
So if you have extremely high premium per employee, that is indicative of some kind of large consolidation happening. It's just one way to look at things. I'm just trying to -- some guidance, of course. But yes, our focus is entirely building the retail business because that's where we see the value because of the individual small agent who can get value from a platform in using their technology, their services, their claims assistance, et cetera, et cetera, and thus be able to share a part of his revenue with the partner and also for the insurance companies, it adds value.
If you can bring 100,000, 200,000 small agents onto the platform from across the country, then they don't need to deploy as much in terms of their own branch network, their own regional networks, so they can afford to pay you more. It's -- see, I think what's happening in the regulation is fixed costs and variable costs because of AUM are becoming blended, right?
So whether you pay as -- or you pay as branch network costs, it's pretty much a cost to you. It's an expense. And I think that blending implies PoSP on its efficiency is able to do pretty well at the retail level. But if you're just buying business, then it's not your business, it would just go away at some point. So I think the retail is the right strategy. That's what we're focusing on.
Understood. And what would be the mix today in terms of segment, motor, health or PoSP side?
I think that's a bit too much detail, given the fact that all our other...
Competitors don't have to declare that. We would like to keep some cards close to our chest.
Yes. But I think we've stated in our note also that we have the highest non-motor business in the industry.
Yes. Yes. Understood. And just lastly, and this is maybe tilting towards the capital allocation today, one of the financial services company, which also runs life and health -- life and non-life insurance has announced acquisition of a TPA. Now for a business like ours, something like a TPA seems to be -- I mean prima facie seems to be something which could provide synergies. I mean do you have any thoughts around that?
See, TPA is a word. It's a regulation, et cetera, et cetera. But if you look at it, we have a 40-odd-percent stake in Visit Health. So yes, we are -- we have been there for 1, 1.5 years. Visit Health is a brilliant platform. I think -- that's there. Now we see. So we've been doing what we've been doing.
We'll take the next question from Srinath, Bellwether Capital.
Just wanted to find out what's actually working for the health insurance business? Last quarter, and I'm guessing this quarter, the growth has come really strong. The sector growth has kind of tapered off a bit and largely driven by pricing. So how is it for us? Is it a pricing-driven growth? Is it -- are we selling more unique policies? And what is driving the growth?
Is it the claims part which we had worked on, offline, porting of policies? Anything you could -- or is it the upper funnel, organic upper funnel itself has taken off in terms of lead generation? Or is it coming out of conversion? If you could spend some time and help us understand what's driving growth in health insurance for us.
Yes. So first, I'll tell you what is not driving our growth. Our ticket size has not changed year-on-year. So that is not a factor in our growth at all. What is driving is actually each of the factors that you mentioned are part of the answer, I think.
I was going to give you a very short answer with karma. But I think Sarbvir said exactly that in a slightly more different way.
I think each of the things that you said is true, top of the funnel, our conversion, the fact that we've worked on the customer experience. And I think what Yashish is referring to as karma is the fact that single-mindedly, we are focused on the quality of the business. So at times, even when conversion has gone other way for us because we are asking more questions, we are having a verification process, et cetera, et cetera, but sometimes in the short run, can act as a break against business. But over a period of time, it really creates this virtuous loop where better customers come to us, they see value in what we are doing, the fact that then the claims experience is better, et cetera, et cetera.
So I think that virtuous circle is kicking in. And I feel that last year was an aberration because of the fact that the comparison with COVID was very tough. So that, I think, hit the fact that we have done a lot of work. See, the fact of the matter is that work doesn't happen over 3 months, right? Work takes many, many months and many quarters, but it shows up only after a certain period of time.
And I think right now, that is what is happening. It's showing up, but it's the work effort of the team over -- I would say...
Last 2 years.
2 years. Not just this quarter.
I can tell you what's changed in the last 2 years. because I was running it directly 2 years ago and now Sarbvir is running it directly. You can call directly there, because the direct person celebrates every day. The indirect person celebrates once in a month or once in a quarter.
And I think what we used to celebrate was volume. What we now celebrate almost every day is the claims, customer service. And I can see that huge change in the organization where -- what's really being celebrated is that. And that is what eventually karma is. What I'm also seeing is a huge focus on disclosure, which is always there.
So I wouldn't say that's a last 2 years story. That's a long-term story that we've had much better disclosure. And the third part is really the on-ground teams that we have built over the last 2 years. And please appreciate for the last 2 years, we faced higher costs because of these. On the claims management side also, there's no revenue that's coming out of handling more claims. We just have cost.
But all of that is eventually coming back in terms of better experience. I talk to customers. They tell me 2 things. Basically, your person is explaining it better and love the in-person contact at times. And the second thing is you have the 30-minute claims support, and we have seen so many occasions where you have actually intervened and got better claims experience to our customers that both of those are starting to become real and word of mouth. And when that starts to happen, it becomes quite nice.
Just a follow-up here, Yashish, is there any kind of numeric stuff you guys have on claims settlement how -- what has been the rate of change of improvement, one? And Sarbvir, what would be the delta on conversions or even if you would say time taken for conversions by our team, the call center or the in-person? Is there a significant delta even there, which is probably what's popping growth? Anything you could qualitatively give.
Yes, that becomes too much detail to get into, and we would rather stay away from that at this stage.
Lot of these things, Srinath -- this is Alok here, take time. So there are 3 things which you also mentioned. One is the brand pull, better customer is coming to us, right? Now that doesn't happen overnight. It takes 16 years of building that brand through word of mouth, through, obviously, doing what you do on a day to day basis. Once you get the customer coming to you, you get good disclosure. But that is just going to be 60% or 70% of the good disclosure part. You also put a huge amount of tech and data, all the stuff that we do in terms of catching any potential fraud.
Now that helps create your book in a very, very different way and a very, very high quality book for your partners who will get aligned to you. And everything is underlined by operating layer, which is a sales layer, service layer renewals, endorsements, claims, all put together, feet on street. Now that again takes very, very long. There will not be a change which will happen in any quarter over last quarter.
But if you look back after 3 years, you will see a huge change.
That is exactly what I meant. When you look at numbers, sometimes, these numbers will not even reflect year-on-year. And sometimes what is looking bad is actually good. Like last year when we looked at the PoSP business, looking slightly not as great, but now it's looking much better. But sometimes just the effort takes time to go through. And I think we are getting the benefit of the effort in the last 6, 7 months, and it's continuing on the health side. We're getting the benefit of our efforts over the last 2 years. I can clearly see that.
We take the next question from Harshit, [indiscernible].
Congratulations on a great set of numbers. Yash, this is on PoSP itself. So I just want to understand that if a particular PoSP agent comes on our platform, but he leaves after, say, 1 year than whatever business you did in that 1 year, that will still be on our books in the sense that if it's a motor business, then I'm not sure, renewal revenue is an advantage. But in all other business, we'll have that renewal advantage.
1-year contracts...
Let us be very, very clear. No. Just one second. We want to be crystal clear on this. I have no doubt whatsoever. In the PoSP, we are a tech provider. We are not commission maker. The business belongs to the agent. It is not our business. Us trying to call it our business is not right. It is their business.
And we get a fee for our service, which is the convenience we are providing to the agent. And the distribution volume we are providing to the supplier may also because it's -- so from the supplier, it's compared with handling agency plus branch network, regional network, regional management network, et cetera, et cetera, and the effort that goes into that, right?
For the agent, it is compared with what benefit we -- but this thing that you can get more on fresh and less on renewals and all, no. That is not true. And no agent will be stupid to give you their business. See, in insurance, people have been doing this business, and it's very precious to do this business. It's very -- it takes a lot of effort. So nobody is going to give you a health business by taking -- let's say, our commission rate is 19%. Nobody is going to give you health business for 19% and forget about renewals. They'll come to your house and take that money. That's obvious. Whether they are with you or without you. I don't think that is something...
No, the reason I asked this was to ensure that is there a way to improve the stickiness of that retail agent, which we are sourcing right now. Because if, for example, in a business like health, if it is more that the code in which the business has been registered is through PB Corporate. I'm just trying the code -- PB Partners, just a code in which the business is registered. So -- and he knows that he has done a lot of business in the first year, second year, then he would be more willing to stay with us if that is the clause. So just from that perspective...
There are schemes, et cetera, you would run, which is very akin to running agency.
So I think the point is very clear that you have to retain the agent. As Yashish explained, the customer is not our customer, but the agent is our customer. We have to retain the agent. And the way you retain the agent is by providing platform, proper timely payout, fair and timely payout. So these are the 3 things which make an agent stick to you.
And as Mandeep is saying that currently, our retention 76%. So that shows that people are valuing our platform, and they are...
And we're very early in that business. It's only our second year, right? So it's very, very early for us.
Got it. Got it. Fair. And I think one, I think you repeated this number, if you can just tell me again. The new and renewal premium for this quarter. Sorry, to just ask again.
2,400 and 1,863.
We'll take the next question from Puneet.
So just 2 questions. One is the data question. What were the Paisabazaar revenues this quarter?
INR 145 crores. Credit revenue. Credit revenue, not Paisabazaar revenue.
Yes, yes. Got it. And the second part, on the -- you have seen costs come down. I'm sorry, I missed the opening remarks. Could you just explain, do we expect these expenses to be the new normal? Your advertising and marketing expenses have come down. So any comments on that?
Yes, we just -- Puneet, we just answered this question. In the sake of time, we will take one new question, just hear the recording. We've just given this answer 15, 20 minutes ago.
We'll take the next question from Rahul.
Yes. This question is for Yashish and Alok. You have delivered similar or better in last 4 quarters -- but the way you've been guiding and you've been delivering time. So congratulations for the very strong execution. What I'm trying to understand where your incremental bandwidth in the last 6 months or maybe in the near future would go. Is it towards any newer initiative that you may expand into?
Or is it continue to do the execution side of it? Or more in terms of how you would increase your technology, maybe now that you're taking the call center guys with chat or anything like that. So where you are spending most of your time now?
Yes. I don't think the team requires us to get into whether we are increasing the efficiency of our call center, et cetera, et cetera. We have quite a interesting business mix and a lot of strategic things that we need to keep managing. So yes, we continue to be active managers there. And we also continue to expand into new opportunities. I think you also know we have things going on in terms of account aggregation. We are looking at the reinsurance brokerage.
We are looking at your -- there are a few other things I'm not allowed to announce yet because we haven't announced them yet, we haven't acted on them or we don't have Board approval yet. But we have been looking at, let's say, payment aggregation services, we're looking at all these. We're looking at lots of services. And so yes, when you see those things coming, there are people like us also like yes, we do make it a point we earn our living. So yes, that's really what it is.
Otherwise, we have an amazing team. Since Sarbvir has come in, my -- Policybazaar people who -- directly tell me we are so happy Sarbvir has came in, he's a much better manager than you are -- you were. So that area has been thrown out of. And I'm very happy with that because he's a friend of mine. Sarbvir is friend of mine. He was my senior in IIT, and he's been my friend for the last, whatever, 30 years, more than 30 years. So yes, I'm very happy. And he's somebody I really looked up to. So I'm very happy, right? But there are things we're doing. I wouldn't worry about that yet.
Yes, yes, yes, I'm sure they are doing an excellent job. Just one more question. I think you answered in a different way on the capital allocation part. I know that you would share the thought at the right moment. But is it -- isn't it a good idea to at least look forward to do a buyback at least to an extent we may have plans to dilute over a period of time, so that at least our base remains intact. Because you just said every year, there would be an ESOP charge because you would be continuously awarding that to your employee. So is that something which is in your mind or you should consider at some point?
We have a pretty clear, this thing in our mind, yes. I think in the -- we do not need so much cash. At some point, it will get returned. There is no doubt about it. But when it's appropriate, we'll announce it.
And we are not very acquisitive, so it's very unlikely that we're likely to -- that we're going to make acquisitions. But then again, we might change our mind. So we are pretty open-minded people. So we'll see. And we'll, of course, keep updating you. It's an opportunity that we have the amount of capital that we have and the position we have and more importantly, the team we have. And I think we will see.
And the reason I mentioned team is because the team also means opportunities. So let's see. I don't want to open our cards out yet.
A quarter of PAT positive is a very good start. But eventually, we're very focused on delivering INR 1,000 crores in FY '27. So let's get there and then we'll see.
Yes. And we will get there, obviously. Just like we got here, we'll get there as well. I think it's a very straightforward business. So no doubts there. But I think, yes, that's...
So Alok, in a way, as you said, that INR 1,000 crores, it's like we should not ask this question until that point. Is that a kind of heading there?
No, no. Nothing to hide, but we are very clear at let's focus on what is more important for us. From the business perspective, scale, growth and profitability has been the focus area. And we have already committed to the market that we want to deliver INR 1,000 crores PAT in FY '27.
Once we deliver those things, a lot of other things become very easy to explain. But it's a still evolving business. Even though we have been around for 16 years, the business still is evolving in multiple ways. We have never done registrable capital. We don't expect that change in the company. But yes, if there's a good opportunity, why not? But whatever happens, we are going to come back to investors and communicate. Whenever we are very clear on whether it's buyback, whether it's dividend, whether it's acquisition, whether it's investing. But as Yashish said, right now, there is no very clear, concrete plan, and we are focused on FY '27.
Yes, there is a concrete plan, but not a formal concrete plan. That's all. In my mind, of course, there's a very clear, concrete plan. But yes, that's not Board approved and we cannot speak about it yet.
We'll take the last question from Bhavya.
I just wanted your comments on the premium per policy. Just back on the hand calculations so that -- it's jumped a lot in this quarter especially. Is it because of the savings business, as you would mentioned?
Yes. The savings business is about 3x higher premium per policy than the health or firm business. So obviously, that would -- but the health has also grown, but the savings has grown. And both of these are higher side of it, right? 2-wheeler policies will be much lower premium per policy.
So -- but look, the important thing is, has the premium per policy of savings grown or has the premium per policy of health grown? Or has the premium policy of term grown? The answer is no. It's just a fixed thing.
Right, sir. And sir, I wanted your comments on the Phygital model, basically, the stores that you've opened, so could you just qualitatively talk to us about the advances that you've made over there? What are the unit economics? Is it better? Or we expect some accretion because of that? And one last housekeeping question, you are still...
So on the Phygital model, it's been a game changer. Totally, credit -- Sarbvir with having thought this up and implemented it. In fact, even in the early stages of implementation, I didn't have questions once he was there. But before that, I always had questions on the Phygital model. But it's worked beautifully.
And there's one more person, actually, I would like to credit. He may not be hearing. It's actually Naveen Tahilyani. Because I do remember the conversation when Naveen actually gave Sarbvir this idea. So I wouldn't totally credit Sarbvir. His credit that he picked up that idea and implemented. But it was actually, Naveen Tahilyani's idea that you guys should think about Phygital. So I do want to credit him. I hope this information gets to him because he will feel good about hearing that he had such a big impact on us. So thank you.
INR 801 crores. I think the number you want, it was INR 801 crores.
Thank you very much. We will close the call now. I know there are a few people who we have not been able to answer. Sorry about that. Just reach out to Rasleen with your questions, and we will answer them properly. We were answering questions properly right now also. But thank you. We close the call now. Have a good evening.