Nomura becomes latest brokerage to cut PB Fintech share price target by 31%, lists 2 scenarios for fair price

Japanese brokerage Nomura has become the latest covering PB Fintech stock to cut the target price by 31% to Rs 1,100 per share after the Insurance Regulatory and Development Authority of India (IRDAI) proposed a ban on ‘dark patterns’ on insurance websites, including practices that require customers to share personal details before accessing product features and pricing information.

Nomura has revised its financial model for PB Fintech following the consultation paper on insurance distribution reforms. The brokerage has lowered its premium estimates for the point-of-sales person (POSP) business, assuming the company exits the segment, while leaving its PolicyBazaar, Dubai and corporate businesses unchanged. It has also adjusted take rates to reflect the proposed commission caps and reduced total expense estimates for FY28 and FY29 by 40% and 48%, respectively.

Following these changes, Nomura has cut its insurance premium estimates by 13% for FY28 and 19% for FY29. Its net profit estimates have been reduced by 72% and 51%, respectively, for the two years. The brokerage expects EBITDA margin to decline to 7.9% in FY28 before recovering to 18.2% in FY29. Nomura has also lowered its estimated revenue compound annual growth rate (CAGR) for FY26-50, based on its discounted cash flow (DCF) model, to 13.2% from 15.1% earlier.


2 scenarios that imply a fair price of Rs 1,335-1,366

In Scenario 1, Nomura assumes health insurance commission caps are revised upwards by 2 percentage points (pp) from the levels currently proposed, citing PB Fintech’s argument that its support to customers during hospital discharge improves customer experience. No other assumptions are changed from the base case.

Under this scenario, revenue estimates rise by 3pp and 4pp in FY28 and FY29, respectively, while net profit estimates increase by 37% and 19%, respectively, compared with the base case. The revenue CAGR over FY26-50F increases by 40 basis points. The fair price rises to INR 1,335, implying a September 2029 forward P/E of 41x.

In Scenario 2, Nomura assumes PolicyBazaar starts selling traditional savings insurance products, with the new segment accounting for 0.5-1.1% of PB Fintech’s total premium mix in FY28-29F. The brokerage expects the revenue CAGR over FY26-50F to increase by 80 basis points compared with its base case, with no other changes to its assumptions.

Under this scenario, net profit estimates rise by 5-6 percentage points in FY28-29F compared with the base case. The fair price for PB Fintech increases to INR 1,366, implying a September 2029 forward P/E of 46x.

Last week, Jefferies also cut the target price to Rs 1,540, forecasting an upside of 44.6% from the last close. The brokerage said PB Fintech indicated that non-life NPV could fall to 33-40% of the original NPV if IRDA's proposed commission cuts in health and motor insurance are implemented. Life insurance NPV, however, is expected to remain broadly similar to current levels, supported by higher renewal commissions in term insurance.

Jefferies estimates that a 10% cut in new business commission rates could translate into a 10-12% decline in earnings. It said the proposed regulations could have a material adverse impact on near-term earnings if implemented, although the consultation paper could still change after feedback.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma 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 disclaimershere.