PB Fintech: Technology innovations – a sustainable moat!

26 Jun 2023 , 10:23 AM

Recommendation: Buy; Target Price: Rs 750

 

At its first virtual analyst meet since listing, PB Fintech (PBFI) highlighted how it uses data and technology to: i) Find the market gaps; ii) Help in product innovation along with partners; iii) Provide superior customer profiles to partners; and iv) Improve customer experience through claim support and aftersales service. Analysts of IIFL Capital Services believe this is a key competitive advantage for PBFI in underpenetrated markets. They forecast PBFI to deliver 29% revenue Cagr over FY23-26; and reach 15% Ebitda margins by FY26 – driven by strong growth in underlying markets, share gains and operating leverage. Analysts of IIFL Capital Services 12-month TP of Rs750 is based on DCF and implies 8.6X/5X on FY24/26 EV/S and 32X on FY26 P/E.

Data-backed product and segment innovation drive growth: 

80% of Policybazaar’s traffic comes organically, which provides it with highintent customer data. This data helps Policybazaar offer innovative and customised products, which expands the addressable market and increases insurance penetration in India. Examples of previously underserved customer segments in term insurance that Policybazaar has tapped successfully include housewives, NRIs and the underprivileged. Similarly, in health insurance, it has partnered with insurance partners to create multiple product variants catering to different segments of customers.

Superior risk assessment and claim support ensure quality of customers: 

Policybazaar’s extensive use of technology and in-house risk management process help it provide superior customer profiles to its insurance partners. It has the best mortality experience amongst all channels, which translates into cheaper prices for customers and better conversions. The company has a 3-layered claim support structure: 24×7 Helpline, On-Ground Concierge and Claims Samadhaan for rejected claims, which help assist customers in <30 min across 100+ cities.

Large and underpenetrated Digital Lending industry provides a long runway for Paisabazaar: Paisabazaar’s unique proposition offers customers a wide choice and ease of comparison in India’s underpenetrated and fast growing digital lending industry. Paisabazaar customer segmentation ensures it has at least 1 loan offer per customer, as it focuses on the under-served segments. It has co-created offerings with its banking partners to fill the market gaps and expand the market.