PB Fintech shares get the cold shoulder despite decent Q3 performance
Positives such as 37% year-on-year revenue growth to ₹1,771 crore were overshadowed by news that the company’s board was slated to meet on 5 February to consider raising capital through a qualified institutional placement to pursue inorganic growth opportunities abroad.
PB Fintech stock fell around 6% on Tuesday despite the company’s decent performance on key parameters in the December quarter (Q3FY26). Among the positives, revenue rose 37% year-on-year to ₹1,771 crore, driven by growth in core online revenue and new initiatives revenue. Insurance premiums jumped 45% and lending disbursals surged 85%. The adjusted Ebitda margin improved to 11% from 6% last year.
New protection premiums grew 68% year-on-year, with health insurance alone growing nearly 80%. Protection products are stickier, renew every year, and create a long-term annuity stream. This recurring revenue is one of the biggest drivers of steady profit improvement.
However, negative margins in the new initiatives business was a sore point. New initiatives include PB Partners, which allows insurance agents to sell policies using Policybazaar’s technology; and PB for Business, which offers employee health and group insurance to companies. Two years ago, this segment contributed about 32% of revenue. In Q3FY26, this rose to 41%. More importantly, it accounted for 44% of the incremental revenue growth this quarter.
Revenue from new initiatives grew 41% year-on-year. Adjusted Ebitda margins for this segment improved from -7% last year to -3% this quarter, and contribution margins turned positive at around 6%. Management indicated that most of these businesses were approaching breakeven, with PB UAE already profitable for four straight quarters.
PB Partners now works with more than 400,000 advisors and has deep reach in tier 4 and tier 5 towns, aiding scale and fixed cost absorption. Management is upbeat on its insurance growth and expects it to outpace the industry. On margins, the focus is now on operating leverage rather than aggressive cost cuts.
QIP announcement
But most of the positives were overshadowed by the announcement that the company’s board was slated to meet on 5 February to consider raising capital through a qualified institutional placement (QIP) to pursue inorganic growth opportunities abroad.
"With the company already sitting on a more than ₹5000 crore cash pile, the requirement of a QIP suggests a large acquisition, potentially resulting in 5-6% dilution," JM Financial Institutional Securities. Management has said that the acquisition will be earnings-per-share-accretive. However, JM Financial said it would need to be at a significant valuation discount as Indian markets were unlikely to ascribe PB’s current trading multiple to the international entity.
There is also a potential headwind from further rationalization of distribution commissions. Developments related to BIMA Sugam – an aggregator-like platform for insurance sales and related services by insurance regulator IRDAI – should also be monitored.
Against this backdrop, the company's valuation at 62 times estimated FY27E earnings per share seems expensive and prices in expectations of extraordinary growth.
topics
