PB Fintech shares crash 30%, bloodbath wipes off Rs 26,200 cr from m-cap after IRDAI’s reform plans. What Citi and Jefferies are warning

Shares of insurance distributor PB Fintech, the parent company of Policybazaar, bore the brunt of IRDAI’s proposed overhaul of the insurance sector, with the stock crashing up to 30% and wiping out more than Rs 26,200 crore from its market capitalisation.

PB Fintech shares breached multiple circuit limits, crashing 30% to trade at Rs 1,320.10 apiece on the NSE. The stock is on track to record its worst single-day plunge since listing in November 2021.

The sharp downturn has wiped out nearly Rs 26,200 crore from the company’s market capitalisation, dragging it down to Rs 61,087.99 crore.

Another insurance distributor, Turtlemint Fintech Solutions, saw its shares plunge 20% to Rs 109.04 apiece, hitting the lower circuit. The stock was headed for its steepest decline since listing in June.

The selloff has wiped out around Rs 803 crore from the newly listed company’s market capitalisation, pulling it down to Rs 3,211 crore.

Also read | Explained: Why PB Fintech, Turtlemint, SBI Life, HDFC Life and other insurance stocks tanked up to 26% on Thursday
The Insurance Regulatory and Development Authority of India (IRDAI) has proposed a major overhaul of the way insurers pay commissions to distributors, with limits to be linked to the type of product, distribution channel, size of the policy and the effort required to sell. The insurance regulator also plans to prohibit ‘dark patterns’ on insurance websites, including practices that require customers to provide personal details before accessing product features and pricing information.

Jefferies says proposed norms negative for distributors

Jefferies noted that IRDA’s distribution consultation paper proposes stricter Expense of Management (EOM) limits for insurers, and 1/2-⅓ rd commission cuts in health, term and motor insurance. Jefferies said this is a risk for PB Fintech and Turtlemint, noting 10% cut in new business commission rates translate to 10-12% fall in their earnings.

Also read: Irdai proposes big changes to insurance commissions; companies, agents may feel the pinch

“The scope for insurers to compensate distributors through opex is also limited, due to overall EOM caps and the regulator stating that any payments to distributors will be considered as commissions,” it added.

The international brokerage sees limited impact for SBI Life and LIC. It currently has a ‘Buy’ rating on the shares of PB Fintech and Turtlemint.

Citi on IRDAI’s proposed reforms

Citi said proposed commission caps could significantly tighten insurance distribution economics, ET Now reported, adding that the Wall Street major estimates distribution economics to compress 70-90% in several high margin categories if implemented as proposed.

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Disclaimer: This article has been written by Debaroti Adhikary, who is not a SEBI-registered Research Analyst or an Investment Adviser. Debaroti Adhikary and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.