Please note that this conference is being recorded. I now hand the conference over to Ms. Rasleen Kaur. Thank you, and over to you, ma'am.
Thank you for joining us today. We have with us Mr. Yashish Dahiya, Chairman and CEO, PB Fintech. Mr. Alok Bansal, Executive Vice Chairman and Whole Time Director of PB Fintech. Mr. Sarbvir Singh, President, Policybazaar. Mr. Naveen Kukreja, CEO, Paisabazaar. Mr. Mandeep Mehta, CFO, PB Fintech. Now I request Mr. Yashish Dahiya to give us a brief update about the Q1 FY23 results.
Hello, everyone. Before I get into the details on the way forward and the Q1 FY23 performance metrics, I'd like to reiterate some facts about our business. There are four pillars that I believe we stand on. Firstly, a majority of health and life insurance consumers in India do their research on Policybazaar. This leads to a higher persistency for these consumers because having done their research, they somewhat know what they are purchasing and hence their likelihood of churning is much lower. We have the best conversion engine for digital inquiry and continue to improve it, as demonstrated by the increased premium for inquiry of 32% over the last 12 months.
As a third leg, we continue to improve the platform in terms of its consumer onboarding service and claim capability, demonstrated by the CSAT, which is at 83%, and the numerous number of unprompted customer messages I receive every day on claim support as well as customer onboarding. Lastly, but not the least, a higher customer disclosure, which is because the customer is filling out the forms themselves, along with straight stronger data analytics and fraud detection mechanism, which lead to a better control on the claim ratios, which eventually also lead to higher claim settlement rates. We continue to build on all four of these pillars, and we get stronger every day. Our core businesses, the insurance marketplace, Policybazaar, and the credit marketplace, Paisabazaar, grew at 59% year-on-year, and have now been adjusted EBITDA positive for the second quarter running.
Out of the total revenue, the credit linked revenue was INR 84 crores for the last quarter. For our insurance business, we had an adjusted EBITDA of INR 18 crores positive for the last quarter. For our complicated products like health and life insurance, we have been extending our customer connect beyond remote calling by giving consumers the convenience to have physical meetings at their home or office and in their local language. We are happy that customers have accepted this wholeheartedly and the results continue to encourage. We have also extended on-ground claim support in 114 cities as of date. Our renewals revenue is now at INR 270 crores annual run rate, and as we have previously mentioned, roughly 85% of this flows directly to the bottom line. Paisabazaar, our credit marketplace, continues to grow very well and has rebounded strongly from COVID.
We are now at an annual run rate of INR 11,200 crores disbursal and 4.3 lakh credit cards issued. We have over 29.5 million customers who've accessed the credit score platform in 823 towns. This number represents 13% of India's credit score active credit score consumers. 75% of these consumers are from non-metros. With increasing digitization, the digital marketplace like ours obviously stands to benefit. Co-created product strategy is shaping up well with Step-Up cards, newer credit cards, et cetera. Our contribution margins have improved significantly over the last two years. I'm quite pleased to say at this stage, we expect the credit business to turn adjusted EBITDA positive by Q4 this year.
To update on new initiatives, PB Partners, our seller aggregator platform, leads the market in scale, has the highest proportion of non-motor business, and has started increasing efficiently. We continue to be positive on all the other new initiatives as well. Essentially, we have delivered two quarters of positive adjusted EBITDA on our core business now. Now onwards, the core business in our best opinion, should continue to grow EBITDA by roughly INR 150 crore every year, every passing year. We are very comfortable supporting new initiatives at roughly INR 200 crore a year, burn as of the present month. Q4, just to kind of issue the seasonality, Q4 is usually the strongest quarter, in our industry, and Q1 is the weakest. However, our core revenues are roughly the same in both these quarters.
If you notice, Q1 revenues are 96% of Q4. Last year, Q1 was a COVID year and health and life insurance demand in terms of inquiries had peaked. Inquiries in the months of April and May this year were not at the same level as last year. However, we were still able to continue to grow, largely owing to higher premium per inquiry which we achieved due to our operations. Inquiry growth has returned in the last few months, and we are confident of higher growth in the coming months and quarters. We are a significant and growing contributor to the fresh retail term and health business, and in fact even to the savings business now of our country, and have delivered two quarters of positive adjusted EBITDA in our core business.
We feel we could be adjusted EBITDA positive as a group by Q4 of this year, for the entire business. It is close enough and we have confidence enough. I'm happy to take questions now.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who has a question may enter star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Sachin from Bank of America. Please go ahead.
Hi. Thank you for the opportunity. I have a few questions. First question, you know, Yashish, Alok would like to actually understand how has the mix for your business changed, you know, as we are recovering away from COVID in terms of health, motor, life? Any specific changes we are seeing out there? A related question is, you know, hopefully, you know, your business is not too impacted, but any impact on the back of inflation are we seeing?
On the back of?
Inflation.
I think both the questions are for Tarun. Yeah. Sachin, on the first part, we are seeing you know, just by the base effect, we have seen a stronger growth in motor in Q1 than other businesses just because last year was very low. Otherwise, as Yashish mentioned, health and term we were able to build despite the drop in inquiries from last year. We are not seeing any major change in the mix of our business in the first quarter. The impact of inflation is also fairly subdued on our business so far. I think there is some general impact on the economy, but for our business it's been fairly subdued.
Got it. Second question is, you know, you guys mentioned on, you know, being close to adjusted EBITDA breakeven by 4 Q. Any thoughts on, you know, how do you guys look at the steady-state sustainable EBITDA margin? You know, how soon, you know, should we be able to reach that after being close to EBITDA breakeven?
I think, we've given a very clear indication now, that, you know, and that was really aimed at, the analyst community, that we believe we should be increasing our profitability by INR 150 crores every year from here onwards, every passing year. That should give you a pretty good steer on where, and I don't see that slowing down for the next three more years at least. That should give you a pretty clear steer on where, we believe the profitability could reach over the next four, five years. Yeah. If one makes even by Q4. Alok, is there anything specific you wanna add here? No. Sachin, see, if we look at the core business, it's been profitable for last two quarters now and, that should continue to build.
As we get to the year-end, that number should be big enough to cover for the experiment that we do. We would definitely want to invest in the experiments to the extent we feel comfortable, and that number Yashish has already given is about INR 200 crore. The way our core business continues to deliver efficiency, I think, over next few years starting from next financial itself, we'll continuously see EBITDA being positive. In fact, the ESOP cost also will come down quite substantially, because of the way accounting happens. From 2034, 2035, I think ESOP cost will be quite minuscule compared to the sort of EBITDA we do. I think they'll be about a third of what they are now. That means that yeah.
Basically we'll be talking about EBITDA by that time.
Yeah. Got it. My last question, Alok, is just to follow up on the experiments you mentioned. Clearly, you know, I mean, while you guys have given a guidance of INR 200 crore, the kind of investments were made look a bit conservative as compared to INR 200 crore. Is there a general thought process that if you're not able to invest that, you know, that could be returned back to shareholders or how do you look at that?
When we say investments, Sachin, we are not talking about investments in third-party or acquisitions. We're talking about investments into our experiments, which are, you know, the seller aggregation platform, the POSP platform that we are building partners, the corporate business that we are building and the international business through the UAE entity that we have got. These are the investments that we were mentioning about INR 200 crore. We remain choosy in terms of our investment into any inorganic growth opportunities. We will only invest if we feel that there is a potential of some synergies with either Policybazaar or Paisabazaar platform. Generally we have been more build versus acquire, and I don't think that stance is going to change in a hurry. Okay. Got it. Thank you.
Thank you. We'll take our next question from the line of Nikhil Agarwal from VT Capital. Please go ahead.
Hi. Good evening, sir. Sir, with regard to the new initiatives and investments that you mentioned. Given that we started this physical model and we started to begin our physical presence in the form of stores, and we have the target of establishing more than 200 stores by FY24, why do we see a reduction in the expenditure in the new initiatives as of this quarter?
Okay. First of all our physical stores or physical presence are not part of our new initiatives. I think, we have clarified this many times. They are part of our core business, and so all those costs are in the core business, all those margins are in the core business. When we say the core business is profitable, that, or adjusted EBITDA, at the adjusted EBITDA level, that implies it includes all those costs of all those stores and all those physical people and everything is included in that.
Why is the expenditure on the core business down from last quarter?
No, no. The expenditure on the core business is. Just give me a second here. Expenditure is, it's just a function of the revenue, right? It's the revenue is down a little bit, compared to last quarter because of the seasonal nature of the business. The expenditure follows that. There's no other thing, right?
Oh. All right, sir. Sir, if you could. Yes, sir. Please go on.
It's pretty much the same as last quarter. There isn't a major change. It's pretty much the same as last quarter. See, Nikhil, we don't really give a separate breakout in terms of the expenditures on the FoS or the physical store side that you do. You know, that is still a very nascent part of the core business. It's growing, and we are taking very measured calls for each location and each store. As these grow, we keep on investing more and more behind these. Typically, any particular store requires a small investment from CapEx perspective, and then there's a small investment from the OpEx perspective first few months. Within those three months to six months time frame, people start to actually break even within that store or within that location and start to contribute back.
We have been expanding slowly over last year. Yeah. Just to explain, there's no confusion on this. Our core or existing business revenue last quarter was INR 386 crores. That is INR 371 crores. Q4 is the biggest quarter. The contribution has gone from INR 179 crores to INR 157 crores. Actually the EBITDA is down by about INR 5 crores. While the revenue has declined by roughly INR 15 crores, the EBITDA is only down by INR 5 crores. That means the expenses have gone down by about INR 10 crores, which is okay. At that level, it is a 3%-4% shift here or there. That has got nothing to do with. It's pretty much the same as it was.
There isn't much change.
All right, sir. Thank you. Sir, if you could give me the renewal revenue for this quarter.
Renewal revenue. The renewal revenue is at INR 270 crore run rate. Annual run rate is INR 70 crores. You just gotta divide that by four. That is.
All right.
What? That's INR 67.5 crores.
7.5. Yes, sir. Sir, what part of our premium would be life and health premium as of today, since health is the major focus as that generates the most renewal revenue for us. What part of the total premium would be life and health as of today?
Approximately 75% of our premium is life and health.
All right. Sir, going forward, sir, this is the last question from me. Going forward in the POSP business, so as we've been doing this, the third-party agents that come on our platform and sell our insurance products, and we forgo a major part of the fee to them. Going forward, how much of that is going to be given to the third-party agents? Are we changing that in the coming quarters, or is it the same model as of now?
I think the answer to that question varies by category and by subcategory even. As you can imagine, it's a competitive market, so I can't share, you know, exact details with you. What we are trying to do is to improve the retention as we go along, as the loyalty of our agents build. The way this works is that agents care about cash flow. They care that who pays them on time and who pays them reliably. That is, you know, now we've established that over the last four quarters, that we are a big player in the market. We are paying on time. Our technology now is the best in the market. People like to work with us.
As that happens, we will be able to retain more as we go along, and you will see the impact of that, as the quarters develop.
All right. Sir, any target for physical presence for this year?
Any target for?
Physical presence for this year in the form of stores.
Stores are a small part of our overall physical presence. Just to give you a sense, we have over 600 people deployed in the field. We have 40 stores only. Stores are a small portion of the overall story. We expect that, you know, as the economics, you know, prove themselves out, we will continue to expand both the number of people in the field as well as the number of stores.
All right. Just one last question. How much are we spending on the customer grievances that is the call center service and other people that are taking up the calls and, you know, addressing the grievances of the customers. How much are we spending on those?
I remember as of last few months, there are about 300 people who are answering customer queries and grievances. Yes, we of course spend on that, but that cost is included within our margins in our core business.
Does it form a major portion of the employee expenses?
No, it's not a major portion, no.
Okay. Thank you, sir. Best of luck.
Thank you. We'll take our next question from the line of Sachin Dixit from JM Financial. Please go ahead.
Hi, Yashish and Alok. Congratulations on a great quarter. My first question was regards to the life insurance sector, right? Today itself, the news is that LIC has become a very prominent force with almost like 60 or 69% of market share. As in you guys onboarded LIC recently, like last five, six months. Are you driving benefits from the partnership now or is it still work in process? For this.
Yes. I'll just take that. LIC's online journey started just last month with us, you know, after all the integrations have been completed. The first month, as you can imagine, it's been a good start. We are slowly building the business, but we are very optimistic, and I think, we see a very good, opportunity ahead. As you said, LIC is a major player in the business, and I think we will also benefit from that as we go along.
So far not much traction then.
I would say the traction is very good. We've just started.
Okay. Sure. My second question is with regards to if you can provide me some sort of mix between new business premium renewal and B2B or the POSP premium, basically. Because obviously these new initiatives are accounting for almost 25% of your revenue today and we do not have much numbers here, so it would be helpful to get some value.
I think in the press release, we have given a breakup of our core business as well as. No, no. We have not. Have we done that?
We just have revenue and investment amount. That's it.
Just a second. I don't think we are doing those breakups here. We don't do those breakups historically. We're not doing those breakups. Sorry about that.
Yeah, I understand. It's just like it's become a significant part of your revenue today, right? It's not trivial, so would be helpful if, going forward, at least you can-
No, the revenues are mentioned. I think we only do policy versus cash. We don't go into segment-wide breakup within the company. We just don't do it for various reasons.
Yeah.
I understand that there is, you know, a requirement for it from or a desire to have that, but we don't provide it.
Right. Yeah, because without any drivers, we do not have number of POSPs. We do not have premium, right? It's very tough for us to drive the model like this is just a number for us right now.
We appreciate that.
Sure. I think the team can help you with some guidance later if you like.
Awesome. Thank you.
Thank you. We'll take our next question from the line of Arjun Vikas from Alpha Wave Global. Please go ahead.
Hi. Thank you. First of all, great results, Alok and Yashish and Sarbvir, thank you. Thank you for giving me the opportunity as well. Quick question. On credit card, I understand you are going to launch co-branded cards or, you know, come out with some card offering of your own. Does that get impacted in any shape and form with the recent PPI you know regulation with banks loading up those cards with credit?
Arjun, thanks. This is Naveen. The PPI regulation was impacting the prepaid instrument. When we talked about the cards, we have two co-branded credit cards live in the market, so they do not get impacted because they're on a credit card platform, not on the PPI platform. They satisfy the co-branding conditions that RBI has laid out when they came out with the regulation on what is allowed and what is not allowed for a co-brand partner to be doing. In both cases, we work with different banks. We're working with them as per the regulations.
No impact in our plans, going forward is what I'm assuming.
Absolutely no impact. Yeah.
Okay, good. Good to hear. On, you know, I was seeing the slide on the claim settlement ratio, which says that you're probably eight percentage points higher than the industry. Just wanted to check what are we doing here, which is so different. Is it just the underwriting which is driving this? In some shape and form, you know, because, you know, there's lesser frauds involved at the time of underwriting or there's actually something they're doing at the time of service which is helping this incremental percentage.
Claim settlement ratio that was example from health insurance. The reason that is happening is that because we have higher disclosure upfront. The main reasons why claims tend to get rejected is because there was lack of disclosure. Person has not told that there is certain, you know, preexisting illness or something which, you know, the insurer uses has to reject for that reason. Because we have such high disclosure, our customers when they claim their policies tend to be very clean. Secondly, our customers also understand their policies much better than probably average. They, their whole process, both in terms of their making relevant claims and the fact that they are, you know, they have disclosed everything tends to, you know, do that.
On top of this, we've spoken about the claim support that we are providing. We have physical presence in 114 cities now. Our person shows up at the hospital if required. We have call center of support as well. When a person has to file a claim, we guide them in terms of, you know, what documents are required, what all is needed. That also helps in ensuring a higher claim settlement ratio.
Got it. Just last question, would you be able to share any kind of guidance or numbers around, you know, customer acquisition costs and, you know, kind of premium we do per agent at the call center now? Or has it changed significantly over the last one or two years?
Sorry. I think Sarbvir should answer that. Sorry.
I think it's really hard to, you know, talk publicly about these sensitive numbers. I would just say that as you can imagine, the premium per inquiry is building, right? I think that number has been shared at over INR 1,500 per inquiry. I think as that builds, you can imagine that the productivity of our agents is only improving, you know, as we go forward. Again, just to remind everyone, the reason our agents are productive is the fact that the person when they come to Policybazaar, they have a higher intention of buying insurance. This is the only platform in the insurance ecosystem where someone comes to buy insurance versus being sold insurance. That is step one for the reason why our productivity is high.
Of course, our agents are very well trained. They have, you know, great support from a technology perspective, from a CRM perspective and everything. So it's these two things put together. The fact that a person comes with higher intention of buying insurance, and secondly, because, you know, we have very well trained and very capable agents. These numbers are only building as we go along.
If you look at our overall health and life business per se. Sorry, Sarbvir, you know, adding. At a very rough number, that number is about INR 10 lakh per agent. At a broad number, per salesperson , that's about INR 10 lakh per month. Typically an agent in the market would be quite happy if they are selling about INR 50,000. About 20x the productivity of what you would call, you know, a standard offline agent. As Sarbvir mentioned, that is largely driven by the fact that there is a desire on the part of the consumer to buy, which is what is expressed by at least voluntarily coming to the site to research that particular product and the technology platform which allows for better onboarding issuance, et cetera.
Got it. Thank you so much.
Thank you. We'll take our next question from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Thanks for the opportunity. Two questions from my side. One is the premium per inquiry. This is gone up by around 15% on a quarter-over-quarter basis. How should we really think of it? You know, you mentioned that, for obvious reasons, motor premium was higher in this quarter. You know, and I would believe that motor premiums would be maybe in line or maybe slightly below your, you know, average premium. How should we really, you know, how should we really think about it? Is it something that you were able to grow, you know, savings at a faster pace? Or is it something that you're seeing a very similar, you know, increase in ticket size across products?
First of all, motor is a very small portion of that answer. I think the real answer is that as we just discussed, the productivity of our agents is going up. They are able to, you know, convert more leads per agent than they were converting earlier. This is driven again by two or three things. Intent of the customer, the technology that we are providing to our agents, you know, you know, to talk as well as the onboarding, et cetera. The third thing is the offline component that we have added, where a person is able to visit the customer in their home or office as they request or desire, and that is giving us an incremental productivity and incremental conversion.
When you put these three things together, that is what you are seeing in that average premium per inquiry, which is being driven upward.
Just to kind of add to Sarbvir's answer there, although I've been given very clear instructions not to interject in Sarbvir's answers because he handles Policybazaar and should not. I'll still say something. If you look at the last 14 years of our existence, we have been putting in the efforts on technology and product and the customer and our training all along. Never in history have we seen a premium per inquiry go up at the rate that it has gone up in the last 12 months. The primary reason for that is the fact that we have started the physical channel. That is the biggest reason why this premium per inquiry is going up. That alone will not explain it because only about 15% of the premium has started going through that channel.
That will not explain 32% increase, but that will probably be the biggest, you know, differentiator over the last two years.
Basically the offline format is obviously doing larger ticket.
It is more productive. There is no doubt the offline format is more productive.
Basically, 15% when you say these are 15% offline inquiries or so, I mean 15% of the inquiries are offline or.
We don't have a single offline inquiry. Just wanted to clarify, we don't have a single offline inquiry. All inquiries come online. They can be closed on the website without assistance, which is what happens to almost all motor, two-wheeler and travel business.
Yes.
For health and life, a bulk of the business used to get closed by the call center through a voice call or a video call. Now increasingly, customers also have the ability to meet with our agents in their office or their home. That last leg is contributing to about 15% of the business. That is where some of the growth in productivity, et cetera, is coming from. That 15% has been growing every month for the last 12 months. 15% is a significant part to start going through a new channel. It's been see mix change and all will keep on happening. Some of these are controllable, some of these are not controllable. If you look at we were converting at X percentage earlier, are we doing a better job of it?
Yes, because of our training, because of all our rest of integrations and all. The effort required per transaction has come down, and it's coming down every quarter. The second part is, are we able to add something to the X? Is it becoming X plus delta? Now that's where this offline physical part is also helping. For the same inquiry or say for the same 100 inquiries, we are able to convert more and convert faster. That is a effort which will continue. Specifically on the physical side, it's a very young experiment still. As we invest in more and as we learn more, I think we continue to, you know, hopefully deliver more and more premium per inquiry from that perspective.
Got it. The second question is, generally on the, you know, on the EBITDA line, if I'm looking at slide number four, what you're saying is that, Q1 FY23 adjusted EBITDA non-GAAP is a negative INR 66 crore number. If you're specifically what you're guiding is that this 66 will come closer to zero by the fourth quarter. Is that the right reading?
That's the right reading. Absolutely.
Sure. The new initiatives, which I believe largely is the POSP business, is currently what I know currently you have expense around INR 71 crore this quarter. You mentioned that you are okay to spend approximately INR 200 crore per year. You know, I mean, in that sense, your existing business will have to kind of match up to getting to a negative or to a near zero number. Is that the right reading?
Yeah, yeah. The existing business will more than cover that cost by FY24. We are fairly confident of that.
This is the three parts again here, if you look at it. One is what we are doing on the insurance side, which continues to be EBITDA positive and it continues to become stronger and stronger over the quarters. The second is what is happening on the tech side, where the EBITDA loss has come down and Yashish mentioned earlier by the end of this year should be breakeven. Third is the experiments which you can already see from last quarter to this quarter the number has come down in terms of the investment that we have done on those experiments. Our endeavor is to keep it around INR 200 crore for the year.
Mm-hmm.
This was the first quarter. Obviously you can see that the number has come down to 70 from 90. For the year, we are quite hopeful that we'll be very near to 200. By the time we get to the quarter four, all these things put together should hopefully result into a, you know, adjusted EBITDA neutral or positive quarter for us.
That clarifies that. Thank you very much. Just one request. If, you know, in one or two quarters down the line, if you can start, sort of, you know, splitting the existing business into the credit and the insurance business, I think that will just help us to read the numbers or the underlying trends better. Thank you.
We take that input in Excel and come back to you with that.
Thank you. Thank you very much and all the best.
Thank you.
Thank you. Our next question is from the line of Arpit Shah from Stallion Asset. Please go ahead.
Hello? Hello?
Please go ahead, sir.
Yes, please go ahead.
Yeah, I have a couple of questions.
Go ahead.
Yeah, I have a couple of questions. I just wanted to understand what will be a quarterly revenue share. Let's say how the first quarter would look like and how the fourth quarter would look like because we are a seasonal business and the Q4 is typically a heavy quarter for the insurance industry. How would Q1, Q2, Q3 and Q4 would look like in terms of as a percentage of.
Historically, see, we don't give forward guidance and all that except for the one I'm giving for Q4. I'm giving some forward guidance because I think everybody needed it and we also feel very confident of it now. Historically, the year has been about 5.5x of the first quarter, but seasonality is reducing for us. You know, you can make your own judgment call on how it would play out.
The JD side vertical also. I think typically what happens is if you look at industry, because industry is skewed towards savings product, that's why you see much higher seasonality for the industry. In our case, because we have very big portion of protection which is not as seasonal, the number is not as skewed also. The number has been coming down for us. In fact few years back this number used to be quite big, but now I think as Yashish said this number for couple of years would have been about 5x-5.5x.
If you look at last year, we did what? INR 400 crore at the end.
Yeah.
This quarter was what? Two.
2.40.
2.38.
Yeah, 2.40.
2.40
2.40.
That's a little more than 5x.
Yeah.
We had a lot of growth of new initiatives in the latter part of the year. There are two parts there, right? Last year, actually Q1 was quite a strong quarter because of COVID compared to the rest of the year. At the same time, we had a lot of new initiatives growth. My view is as a fair assessment, I think, yeah, that's a reasonable number there. It's sort of between about 5x-5.5x. I don't think that'll be the case this year. I think it'll be, you know, on the lower end of that spectrum at best.
Around Q1 FY25 is a typical revenue that you can consider holding?
Yeah. See, yeah, we do have plans. We don't share them. It's up to you want to.
That's very good. No, no.
It's historical number. The historical number has been 5x-5.5x.
Got it. The ESOP cost this quarter will be around INR 170 crore. Would that be a right number?
Yeah. Something around 167.
INR 167 crore.
INR 167 crore. Okay. I just wanted a clarity on the INR 150 crore, adjusted EBITDA, you were referring to an increase every year. What is that number exactly? Like INR 150 crore which would keep happening every year or how is it? Is it on adjusted EBITDA?
Approximately INR 150 crores every year. That's our assessment.
On adjusted EBITDA or normal EBITDA?
At the adjusted EBITDA level.
Mm-hmm.
If we do X adjusted EBITDA in a particular year, the next year it should be above 150 more than that.
This year you're expecting it to be zero and probably for FY 2024 we would move to INR 150 crores.
The year won't be zero, the last quarter would be zero.
Okay. Got it. If LIC has come into our as a partner, wouldn't your addressable opportunity go higher by like let's say 3x or 4x? Because they are like 70% of the market in the life insurance part.
It doesn't work quite like that. As you can imagine, I wouldn't want to go into what our opportunity could be, but you're right, it's a very big opportunity. There are obviously LIC very strong distribution already, so I won't say that, you know, there is 4x opportunity. It's a big opportunity and, you know, our focus always is to make the most of it, and see where we end up here.
Got it. Just in the new initiatives, what would be our fixed cost.
If you were to think about this, think about it in a very simple manner. It's like a restaurant where a certain number of customers come, and it has a certain set of dishes, and suddenly the most popular dish also becomes available. I don't think the restaurant. It'll be very hard to say that the restaurant sales would become 4x just because the most popular dish became available. Same set of customers coming, right? Yes, the restaurant revenue might go up some bit, but I think that's the way to look at it. It's like there is a fixed number of people who are coming to us. I doubt if our conversion rates will quadruple. But yes, we expect some improvement in that, you know, obviously.
Got it. Just wanted to understand the fixed cost overheads in the new initiatives business. Right now you're gonna be burning close to INR 1 crore. What would be that fixed cost overhead line item sitting there? At what scale that line item would stop growing actually?
Sorry, on the new initiatives?
Yeah, on the new initiative. No.
Yeah. I think we've peaked out on that. It wouldn't require a lot more from here onwards. You know, I think, I don't have, you know, a view on it increasing any further.
We've peaked out on it. As I explained last quarter that we had peaked out on overall losses. This year I could say this quarter I can say we've peaked out on the.
No, I just want to add that if you see Q3, Q4, and Q1 of this year, each quarter the investment in the new initiatives has come down.
Right.
I think, to your point, it's slowly, you know, we are moving to a point where the fixed costs will start getting covered. As Yashish said, by Q4, you know, we would like to be breakeven for the whole business.
Our direct costs in that business are around INR 200 crore every quarter, right?
Direct cost 24.
124 + 54.
For the all new initiatives taken together.
Correct.
For all new initiatives put together, yes, roughly about INR 200 that much, yeah. About INR 180.
180.
INR 190 crores. Yeah. INR 180 crores. INR 190 crores.
Once we see the new business revenues crossing INR 100 crore broadly, that is when we become contribution?
These are not fixed costs, these are direct costs. See, before we get into that detail, just, let's take a step back and understand a bit about our business. There are three things, scale, growth, and profitability. Scale and growth also they are very linked to each other, but, both are different qualifications for us in terms of how what sort of support we get from suppliers, what sort of, you know, input we get from investor community and everyone else. New initiatives are very important because these are opportunities out there where we want to invest. You know, I don't know whether we've mentioned it, but we have got more than INR 5,000 crore on the balance sheet as of June end.
It will be quite stupid of us as a management team not to figure out what are the right opportunities to invest and look for the future growth, you know, next three years, five years growth areas. In new initiative, one cost is a direct cost. Direct cost will obviously grow as the revenue grows, but we will try to become more and more efficient. If you look at our contribution percentage on new initiative, it used to be 52% negative last quarter, which has come down to 14% negative. Now our hope is we continue to drive this downwards so that in some time, whether it is one year, two years, three years, but in some time we are able to get to a zero contribution number here.
We all believe that this is the right way for the business to look at growth over the next five years or seven years time frame. We will continue to invest. The number that Yashish mentioned earlier and that we are reiterating will be about INR 200 crore for the year that we are willing to invest as of now. If it changes, we'll obviously come back to you guys and inform you.
Got it. Thank you. Thank you so much.
Thank you. Our next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Thanks for the opportunity. Am I audible?
Dipanjan, we can't hear you very clearly.
Is this better?
Yes, sir.
Yes, much better.
Sure. First is a data keeping question. If you can split your premiums on the insurance business between new and renewal. The second, you know, more from a qualitative perspective, you know, if I just do some numbers on your contribution margins, what it looks like is that the entire benefit has come from the digital insurance business, where the contribution margins are probably now 60% plus. To some extent, that looks like that is probably driven by significant reduction in your ad and promotional spend that goes into the contribution. Even though the share of customers coming directly and some of these factors and the mix has probably remained constant. If you can give some color on that.
Third, I think, more from the premium mix side, it looks that the YoY growth in premium through your digital channel, has been in high double digits or maybe a little bit more than that. Is it because of slowdown in term or is there something to read into it? That's all.
Do you want to take this? Yeah, sure. Please. No, no. The first question, Dipanjan, is that our ad spend is driven by, you know, the business and everything that we are doing in each month. There is no such, you know, thing that we have slowed down or speeded up the process. Last year was a COVID year. April, May were very strong months because of COVID, so obviously we were very visible and active on television. This quarter is a more normal quarter, and we spent as we would in any first quarter of the year. Overall it looks like we have.
We've increased that.
No, you increased, yeah.
I think.
I think, if you, if you're okay, if you could take this offline with Rasleen, that would be helpful because our grant spend or our ad spend has not really come down. If anything, it's higher.
Sure. I'll take it.
I would say just take it offline. I thought that'd probably be more helpful.
Sure, I will do that. If you can give the split between renewal and new business premium for the quarter.
Of the total premium, new business is INR 1,390 crores and renewal is INR 1,040 crores.
Okay, sure. Lastly, you know, the origination of the premiums, it looks like the origination through the digital channel has been a bit soft. Is my understanding correct? If you can, you know, elaborate on the probable reasons for that.
Look, I think what you're attributing to is again, because in term and health last year and the protection business last year was a very strong quarter. First quarter was very unusually strong because of COVID. There is some difference, because of that. That has, you know, obviously happened this quarter. Other than that, I think if you see the results, especially on the revenue side, the growth is really strong.
Cool.
If you look at Q4 versus Q1, we are pretty flat on our premiums. There isn't any slowdown et cetera to say this year from that perspective. Of course, last year was an exceptional year, so you cannot really take you know the demand for last year because obviously during COVID, everybody needed health and life a lot more than they would in a non-COVID year. Yes, Q4, Q3, they're good.
Sure. I'll take that question offline, and thanks and all the best.
Sure.
Thank you. Our next question is from the line of Dhaval from DSP. Please go ahead.
Yeah. A couple of questions. First is, relating to, you know, could you just, give the revenue for, Paisabazaar, for the quarter?
The credit revenue is INR 84 crore for the quarter.
Okay. The distribution would be, like, the credit card, et cetera, would be?
Yeah, we don't get into those details. We don't go into segment by segment. The leading product out there is unsecured loans and credit cards, and they are both growing well. You know, we do not give more disclosure than that. We just don't do, you know, product level reporting. What we have given, Dhaval, is the disbursal growth and credit card growth. Disbursals grew by about 135% YoY, and number of credit cards issued grew by about 600%+ YoY.
Got it.
You can get a sense from that.
Sure. What would be the equivalent number for last quarter? The INR 84 crore equivalent number for last quarter would be approximately?
Our revenue Q-on-Q grew by about 8%.
Got it. The second question, just to get it clear, is, you know, I mean, it seems assuming the adjusted EBITDA is zero in the fourth quarter. Basically, we are saying that the adjusted EBITDA next year would be zero. And our ESOP cost, which probably this year we, I mean, given the trajectory, could end about INR 600 odd crore, that will also phase out in the next year. Somewhere in FY25 or so, we expect a sort of EBITDA breakeven or close to EBITDA breakeven. Is that understanding correct?
Let's see is all I would say. Let's see.
Okay. Okay.
Your understanding is correct, but your and my understanding might be different, is all I'm saying. Let's see. Let's wait and watch.
Okay. Where would the difference be? I mean, would it be?
Looking at the past numbers and looking at what all you know, your understanding is correct.
Okay. Okay, got it. Just, to confirm the ESOP cost for the year, we expect it to be around INR 600 crore for the year?
INR 544. Yeah. I think it is lower. I think it will be more like INR 550. A bulk of ESOPs that you see here were allocated last October. That generally cost gets divided between two financial years. Last two quarters of the last financial year and two quarters of this financial year, then it comes down a little bit. Again, for two quarters of this year and two quarters of next year. We'll continue to see it coming down for next five years. You know, for the number for this year is about INR 540, INR 550. INR 540. See, this year is five. Just to give everybody clarity on this, just make a note of it so you guys are all clear. This year it's about INR 550. Next year it's about INR 300.
The year after, it's about INR 189 crore. The year after, it's less than INR 100 crore. The year after, it's about INR 30 crore for the year. That's the FY25 you said it should be. FY24, the year 2024-2025, it's about 80-90 crores. From all the information we know at this stage, I don't see why our profit shouldn't be higher than that, because if by 2022-2023, let's just do the math, right? If by the end of 2022-2023, we've broken even, then by the INR 150 crore we're talking about, clearly we should be at a run rate to deliver this INR 190 crore. I don't see why not. Actually even think about the 150, the break-even part, right? Why am I saying this?
Look, last year, Policybazaar in the last quarter made INR 28 crore of EBITDA. The Paisabazaar made about whatever, 10, 12, 18 crore or something of loss. Next year, Paisabazaar or the credit business is going to be break even. There is no reason why Policybazaar will not do about INR 50 crore of positive, and there is no reason our new business will take more than INR 50 crore. At this point, you know, we feel fairly confident about that number. Now, things change, of course. We'll watch it. You know, why should things change? Let's see.
We're fairly clear. Just one last thing. In terms of the split that you gave for new and renewal, the renewal rate seems to have come down. Is it more seasonal or product mix?
No, no. That's a wrong conclusion. Please don't. See, sometimes with, you know, over analysis, we get to the wrong conclusion. I can confidently tell you very, very categorically that our renewal rate, if anything, has actually gone up by a few percentage points and definitely one of the strongest in the industry. In fact, we are positively surprised by it. Do not go to the wrong conclusion, is all I would suggest. You may be reading something more than what needs to be read in the data.
Sure, sure. Okay. Got it. Thanks. All the best.
Thank you. Our next question is from the line of Abhishek Khanna from Jefferies. Please go ahead.
Hello. Hi, am I audible?
Yes.
I just had a basic question. Q4 to Q1, because we've been talking about that seasonality in different quarters. I just wanted to understand Q4 to Q1, we've seen a growth in our renewal revenue. We've seen a growth in our insurance premium disbursements as well. What really explains that 6%-7% decline in the existing revenue? Is it some product mix change? I mean, what explains that decline despite whatever 10%-12% increase that we've seen in the disbursed premiums and the renewal revenues also?
Broadly, if I was to explain to you, the 6% decline or the 4% decline that we see in the revenues, from Q4 to Q1 would be probably because of about 8% decline in fresh insurance premium compared to Q4, which is very expected, right? You're comparing the March quarter with the, you know, April, May, June quarter. In the insurance industry, those are not really very comparable quarters. I think that is it. There is not much mix change, et cetera. Just seasonality, nothing more than that. Do not, you know, I think it's a pretty strong result.
If your revenue is the same as the strongest quarter of the year, if you come up with revenue which is pretty much the same, that is a pretty strong result, I would say. Just to add, I would encourage you to look at the industry statistics which come out, you know, every month and have come out for the first quarter. You'll find that the industry seasonality is much more than the seasonality that you're seeing over here.
No, no, I totally understand that, but the only question that I had was because your premiums aren't declining. Are you saying that the decline is in your persistency or new business premium, is that the case? Because the total.
There may be some shift from, you know, there may be some higher renewal. We gave you the renewal premium and the fresh premium break up also, which was, 1,330 and, whatever, so and the 1,040 of renewal premium. All I'm saying is don't read too much into a 4% shift here.
Sure. Just one more question. When you say that on the renewal revenue, your margins are about 85% or so, is that all of the costs taken from that revenue? Is that?
Everything taken into account. We do our internal analysis fully loaded. It's about 85%. We've done this analysis multiple times.
Sure.
It's 85%.
That's broadly the EBITDA and so to say.
Yeah. The telecom, people, management, everything gets into it.
Got it. Just one last question on that, because I remember that number being 90%. I know it's not a material shift, but then as the revenue gets larger, is that?
If I agree with you because we write everything, then it's 85.
Now that this 85% number you're saying should be inclusive of all costs and should stay as it is right now. 85% number going forward should also be a good approximation.
Because see, as years go by, you have to understand the renewal dynamic, right? First year it is X, next year it is more than X, third year it is more than X. By the time you get to third year is 97% types here. Hopefully as our book builds up into the future, it should be reducing. The cost of doing the renewal should be reducing. 85% is also good enough, yeah.
Sure. Thanks a lot. That's it from my side.
Thank you. We'll take our next question from the line of Umang Shah from Arohi Asset Management. Please go ahead.
Hi, good evening, and thank you so much for taking my question. The first one is on slide number three. If we have the year-over-year premiums increasing from INR 1,594 to INR 2,430, how much of the growth is explained using new initiatives and how much is the growth in the core Policybazaar business? If you could help us appreciate that.
We haven't shared this breakup, but again, you know, you can do the math based on the revenue, right? You can get to some numbers. Obviously there is the new initiatives add to the growth and there is growth in the existing business as well. See, there's another INR 34,000 revenue there on the new initiatives. If you take away the credit revenue, there is probably INR 290-odd crore of revenue here on the, you know, existing businesses. You could perhaps take some kind of a split to that.
Got it. Is there a material improvement in take rates or is the entire growth in the revenues explained by growth in premiums?
The take rate has improved materially in one of the segments. We'll just leave it there, but it's improved materially in one of the segments. Improvement in the existing business.
Got it. Hence, Yashish, you know, just wanted to understand the premium growth in the core.
Sorry, can you repeat that?
Yeah. Hence wanted to understand the premium growth because, you know, we have some revenue growth. We are experiencing increase in take rate and hence wanted to understand the premium growth. Because if the
Sorry. Just to be clear, the take rate point that Yashish was making is in a particular segment of our existing business. On an overall basis, the take rates are fairly steady. Take rate expansion is not a key driver of the whole thing.
Understood. Got it. The second question I had was to Naveen. Could you share the contribution margin for Paisabazaar?
For the credit business, contribution margin at a business level, we are not sharing, but in overall level, we share that number which is about 40%-45% between both insurance and credit business.
Is the credit business higher or lower than this number?
It is lower than this number, but let's not get into further details.
Yeah. I think, if you wanted to get into more detail, you could refer to slide number.
There is a slide in the presentation, which is slide number what?
Thirty-six.
36. Where you can see, you know, how the lending business has been moving.
Yeah. That gives you an indication of how the EBITDA margin is improving over a period of last two years.
Got it.
And-
Got it.
How they're getting close to the profitability.
Got it. The last question I had was the outlook on the retail protection side. You know, if you see the industry, a lot of the life insurers are reporting massive drops in retail protection. Given that, we are market leaders in that space, how does it impact our business and how do we think about growth in business just more from a medium-term view?
I think there are two things to understand about retail protection. The number of people in India who are term is only, you know, 60 lakhs or so. There is a large opportunity that is available for term insurance in India. The medium to long-term view on this, I think segment is very positive. What has happened in the near term is that because of COVID, the industry went through a significant shift in terms of both process and price. That, you know, if you see in this quarter probably came together, because last year was a very high demand quarter. Now, going forward, what we expect is the processes have largely stabilized. Pricing also has largely stabilized. Because of the new Use and File regulations, you know, you are going to get new products, much more innovation in this category as we go forward.
I think you will find that the category will build as we go through this year. We are actually very optimistic about term and protection in general, and I think you will see that building as we go through this year.
I want to say something in addition to this, and I'll say something having watched this industry now for the last 13, 14 years and you know, pretty much, you know, Policybazaar has been at the forefront of this whole term insurance market. Take my word for whatever you think they're worth. See, from 2009 to 2017, you saw a steady decline every year in term insurance prices. I think certain new channels were really, really opened up in about 2016, 2017, that timeframe. I think those who are in the know of the market know which channels those were. I think there was a differential experience very clearly on the claim ratio.
When that hit the reinsurers, because essentially the same prices that were coming through the the let's say the direct channel or the digital channel or us and the insurance companies' direct platforms was also extended to certain other channels. That had a dramatically negative effect on the reinsurers. Now, you know, at least that is acknowledged in some circles. That led to essentially a negative surprise for two of, you know, at least RGA and a few other reinsurers. RGA essentially pretty much pulled out and then, you know, there was a dearth of reinsurers. Everybody was a bit worried. My assessment is there is very clear understanding at the reinsurer end now that there is differential risk across channels. I don't talk about just Policybazaar here, okay? I talk about the entire Policybazaar, the insurance company websites, et cetera.
They are at a differential risk for disclosure reasons, for whatever reasons, because of the amount of effort that has been put in, you know, the checks and balances that have been put in place. If you wish, you know, at some point, I would love to, for a select group of you, host a one-hour session where we could take you through what kind of checks and balances have been put in place which leads to that. Because of that, the reinsurers, in my opinion, are willing to support some kind of different prices across these. Now, it is up to insurers to take those, not take those, and to some extent, that will determine, you know, the future of the industry.
I do think some insurers are taking those, some insurers are not taking those as of now, but the industry is in that zone. You know, that's my assessment of the situation. I think the market will grow. We continue to do good quality business. We haven't seen what has been reported in the media or whatever has been reported, that data we have not seen. You know, our data is quite out there. I'll kind of leave it there. I'm not talking about term versus TROP, et cetera. I'm talking about just term. That's it.
As for those who understand, there is a TROP segment and there's a term segment, and the TROP can have slightly higher premiums, but the risk component is unlimited. You guys know all this, yeah. For the ones who know, you already know it.
Got it, sir. Thank you so much and all the best.
Thank you.
Thank you. We will take that as a last question. Now I'll hand over the floor back to the management for closing comments. Over to you, sir.
Thank you very much to all of you for you know for your participation and all your questions. Very you know heartening to see the participation and look forward to speaking to you in another three months' time. Thank you for now. Have a good evening. Bye.
Thank you. On behalf of PB Fintech Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.