PB Fintech Ltd, the parent company of Policybazaar and Paisabazaar, saw its shares rallying 7 per cent in Tuesday's trade amid a broader rally in the stock market. The scrip hit a high of Rs 1,450 on BSE, up 6.62 per cent, as Kotak Institutional Equities upgraded the stock to 'Add' on strong growth prospects.
To revisit its 52-week high of Rs 2,254.95, hit on January 6, the PB Fintech stock still needed a 56 per cent rally. But Kotak's fair value for the stock, following Tuesday's rally, suggests only 5 per cent upside ahead.
The recent drop in the PB Fintech stock came amid investor doubts over growth and profitability. There are concerns over a likely slower ULIPs -- one of the high growth drivers in 9MFY25 for PB Fintech, lower motor sales and a lack of identifiable near-term growth drivers for the industry. Kotak, however, felt that PB Fintech has multiple growth segments to toggle, acumen to identify demand gaps and the ability to capitalise on the same.
The domestic broking firm remained assertive on PB Fintech's ability to deliver 1.8-2 times industry-level growth, with improving leverage.
"Profitability concerns emanate from benign competitive intensity in the life sector after surrender value and EoM guidelines drove non-life companies to cut commissions; recent media articles suggest a likely reintroduction of a commission cap. PB remains a strong and indispensable franchise, which requires minimal insurer support (versus agency or bancassurance) and hence, it will continue to command superior commissions," Kotak said.
The broking firm noted that PB Fintech has recently made significant changes in its senior management. Calling it still early days, Kotak said the company seems to be moving to expand its overall offering to cover protection/indemnity, longevity and borrowings.
"We will explore if the company will eventually integrate the two platforms— Policybazaar and Paisabazaar. In the past, management had categorically denied merging the two or getting into the distribution of investment products," it said.
Kotak said Policybazaar is a strong insurance brand in India, with unparalleled mindshare. While insurance is often reckoned as a push product, PB Fintech has used a combination of pull and nudge to sell need-based insurance, it said.
The broking firm lowered its target price on PB Fintech to Rs 1,525 from Rs 1,600 earlier. This target hint at a further 5 per cent upside over the prevailing stock price.