Good morning. A very warm welcome to PB Fintech Limited earnings call, Quarter 4, Financial Year 2024-2025. Today we have with us Mr. Yashish Dahiya, Chairman and Group CEO PB Fintech; Mr. Alok Bansal, Executive Vice Chairman PB Fintech; Mr. Sarbvir Singh, Joint Group CEO PB Fintech; Ms. Santosh Agarwal, Chief Executive Officer, Paisabazaar; Mr. Mandeep Mehta, Group CFO PB Fintech; and I'm Rasleen. I hand over to Mr. Yashish for his introductory address.
Thank you, Rasleen. Good morning, all. Just sharing our update for the last quarter and the year. Our total insurance premium for the quarter was at INR 7,030 crores, up 37%, led by growth in new health. With this, the total insurance premium for the year was INR 23,486 crores, with a growth of 45% in the new core online insurance premium and 48% in the new health and life insurance premium. I just wanted to make a little comment here. As I look at our insurance revenue over the last five years, in 2021, we were at INR 619 crores, in 2022, we were at INR 984 crores. I will not go through the whole list, but we are now at INR 2,373 crores. If I do the CAGR for five years, I am talking about just the core insurance premium. Our CAGR for five years is 43%.
The new insurance core premium for the quarter is up 21% year on year, and we do not feel very happy about that. However, if you exclude savings, now for the last nine quarters, we have been between 35%-45%. Yes, this is lower because it has been pulled down by savings in this quarter, and savings have come in below our expectation that we had at the beginning of the quarter also. The health business has surprisingly continued to grow. By now, I would have expected it to slow down a little bit, but now it has been nine quarters, and it has been growing very, very strongly. We have seen other parts of our business, like motor, two-wheeler, and travel, returning to the above 30% growth, which it was not for some time.
We continue to improve our customer onboarding and claim support in the insurance area, and our CSAT is now consistent at above 90%. To be clear, it's actually 92.1%, but we are saying just 90% right now because we are revalidating that 92% because it just has gone up quite a bit. We are doing some more assessments around it. Our consolidated operating revenue grew at 38% to INR 1,508 crore for the quarter. The core insurance revenue is up 46% year on year, and the core credit revenue is down 21%. This brings our total operating revenue to just shy of INR 5,000 crore. It's INR 4,977 crore for the year, which is 45% up. I just want to take one second to remind people the year we went public. This INR 4,977 at that point was about INR 890 crore.
The company is about six times larger in the last four years or so, from 2021- 2025. Just to kind of keep that in mind, what we used to do in the whole year, we're now doing in every two months. Our trail revenue is now at INR 817 crores from INR 577 crores last year in the same quarter, 42% growth. This is at an ARR of INR 817 crores. This is a key driver of long-term profit growth, as we've always said. The delta between four consecutive quarters has consistently been increasing, and this will keep going up. I think we have that somewhere in our presentation. You can see how it's been going up. Our credit revenue for the quarter is at INR 115 crores. We also had a management change during the quarter, and that is why you are seeing Santosh here.
Disbursal is at INR 2,368 crores for the core online business. Do appreciate beyond the INR 115 crores, there's another INR 55 crores of revenue, which is coming from essentially a POSP-type business in the credit side, which is more focused on the secured side. We continue to strengthen our leadership in new initiatives, which have been doing really well, with a growth of 50% year on year, and an adjusted EBITDA margin moving from - 10% to - 6% within the year. There is now a 4% positive contribution. PB Partners, our agent platform, is now standing head and shoulders above any of the competitors and continues to lead the market in both scale and efficiency. We have moved the business increasingly towards smaller and higher quality advisors. We are working a lot on that, and it's showing a very decided move in that direction and consistently so.
We have the most diversified business across the various lines of business, and we are now present pretty much everywhere, 99% of PIN codes we have a presence in. Our UAE insurance premium has grown 76% year on year, and there is a bit of a positive surprise there. That business has both turned profitable, and I feel confident it's turned profitable kind of forever because you usually can't react to one month or two months, but now it's kind of steadily moving in that direction. I don't think it will ever go back into the red again. That is a very interesting phase where a B2C business goes from because that means it's kind of started making enough revenue to cover its fixed costs, and from there onwards, life should be a lot better.
Our consolidated PAT for PB Fintech grew from INR 64 crores to INR 353 crores, which is quite interesting, but again, it was quite anticipated as well. Our margins have moved from 2%- 5% in the full year. Our closing cash balance was INR 5,400 crores. I think we've spoken about various things, and you can see how the growth has been. There's a CAGR of 52% for the last four years from 2022- 2025, and the PAT margin has moved from - 58%- 7%. Once more, while these numbers sound very good, - 58%- 7%, and they are, they were pretty much as planned.
The only thing I would say, which we think we should start to deserve some credit for, this is a management that is delivering as per its plan or as per, and that's quite hard to do over a multi-year period. Now you've seen about three, four years of us saying, "This is what will happen, this is what will happen," and actually go ahead and do that. With that, I'll open up to questions. Thank you very much.
Thank you, Yashish. We'll take a minute for questions together. Please raise your hand and wait to be unmuted, and we'll take the question. We'll take the first question from Sachin Dixit, JM Financial. Sachin, please unmute yourself.
Hey, hi, Rasleen. Hey, I hope you can hear me now.
Yes, very well.
Yeah, hi. Congrats, Yashish and team, on a decent set of results. My first question is with regards to the contribution margin expansion. Obviously, you have guided towards it, so credits to you to have delivered on that. The jump was quite sharp, right? QOQ 5 percentage points. Obviously, we could understand some of the drivers. What I needed you to do probably is if you can break down those drivers, maybe between, let's say, how renewables, how much of the impact would have come from there roughly, or maybe the change in new business premium with savings being lower, health continuing to sustain the growth. If you can break that 5 percentage points jump between different segments, that will be helpful.
See, if you think about it, we have margins coming from three, four different angles, right? If you look at our business, we try to break it down, and I'm not talking about just last quarter, but if you look at our business in general, there is not much change in take rates of any one business line. We have broadly three or four kinds of businesses. One is our core fresh health business. Second is our core health renewables business. Just kind of keep these two in two buckets, or let's even call it all renewables business, right? Of course, the fresh health business comes, and we are getting sharper and sharper at defining this, comes at a negative margin. It's a negative margin of whatever, 15%-20%. The renewables business comes at a fairly high profitable clip.
On the other hand, our overall, if you think about our overall core business, that operates broadly. If you leave out renewables and if you leave out fresh health, that operates at broadly a 20% kind of margin. Okay, these are the two areas. You have Paisabazaar, which is doing its thing, and the new initiatives are largely at zero to a few percentage points margin. A lot of things depend on how these move. Now, the structural shift is that renewables keep growing on a consistent basis. As they keep growing, your margins somewhat keep expanding. However, the core business, the core online business without renewables and without fresh health is not without profits. That also has a 20% margin, and that also, as it keeps growing, also keeps driving profits up.
If you ask me, about half and half is driven by the profits and the margins are driven by these two: core online business, and that includes Paisabazaar as well, as well as your renewables growth. Now, the margin depleting part is actually your fresh health. Look, we struggle to explain this in many ways. Whenever fresh health grows, that is a cause of celebration, not a cause of worry, but it will dampen your profitability, and it will dampen it quite sharply. A lot of the things have to do with those mixes. We are at a stage where for the last three or four quarters, we have been somewhat investing with an expectation of growth on all business fronts.
Today, if you think about it, maybe on the savings business front, we have invested, but we haven't reached the rewards of that in the last one or two quarters. We're thinking hard about it. We're not at a stage where we think we will not have growth. We're certainly not. It is just one quarter, and you don't make a strategy basis one quarter. We are certainly thinking about diversification of products and figuring out how we do better on an ongoing basis in that area. I think those are the pieces that are driving it. We haven't got specific to, yeah.
I think, Sachin, apart from what Yashish explained, sequentially, I think your question perhaps was about the sequential improvement in the margin. That is because we were investing in the call center side in Q2 and Q3 especially. That investment obviously came down in Q4 because we maintained the scale of our call center. That is the other reason why the margin has expanded, because now the growth in call center cost was lower this quarter as compared to the first three quarters.
Got it. Got it. Thanks for that.
I would encourage you to look at it on a full year basis because these things move up and down depending on what one is doing in any one given quarter.
The cash-based our business is, I agree, a full year is a great way, but it's always a 12-month rolling. It's a beautiful way of looking at our business because that takes away any form of seasonality. That's why we specifically give that breakup of just look at it on a 12-month rolling at every given point.
Right. Just a quick follow-up on this one. Earlier, you guys used to mention in your presentation that renewal is 85% contribution margin. This quarter, we noticed you have changed the language to being 80%+ contribution margin. Any particular reason for that?
Yeah, we are also getting, look, there is a science to it. And of course, there's a lot of allocation of costs, right? I'll explain what that means. Initially, what we were looking at was the cost of doing the renewal in terms of payment gateway costs, our calling costs in creating that sale. If you look at our cost base, there is marketing cost, there is sales cost, there is a call center cost, and the sales cost has got a loading of management, etc., right? However, there are costs beyond that also. There's customer service cost. There is claims management cost, and we've been investing in those very heavily over the last two, three years. Some of those costs, now there is no difference between the claims cost on a fresh business and renewables business.
If you actually get smart about it, actually the renewals come more in the renewals business than in the fresh business. Sorry, the claims support comes a little more. We are just getting smarter and smarter around these allocations. I think at this point, what I would say is it is somewhere between 77%-80%. That is where we are. Of course, some streams like life might be at 93%, but overall, it comes around at that point. As we learn more, we communicate more. It is just getting smarter around the allocations and a little more what you call ABC kind of allocation.
Fair enough. Really helpful.
What we are doing now, Sachin, what we are doing internally, just to explain, internally, we are moving all our businesses to a fresh and renewables P&L kind of review. Earlier, we did not do it to that extent because, of course, that has an implication because the moment you get to that, then the internal people force these allocations a lot sharper. That is what we are bringing out in the outside world as well.
Makes sense. My second question is on the OCF side. While we noted that the company turned OCF positive last year, last fiscal year, this year, we seem to have reverted back to being negative with receivables being a major factor. It will be great to have some light on that as well.
Receivables have got multiple things, but one of the big shifts that's going to drive over the next few years, and we should all keep that in mind, is going to be the one-by-n, which essentially means that while the business is happening, there is a shift in how the money is being collected. That is because of the one-by-n accounting of the insurers. This is something that will play out over a couple of years' time, especially for the first 12 months.
Yeah. There is one-by-n. The second thing is that in health, we are selling a lot more plans on monthly mode. Until last year, our business was largely on annual mode. Now we are selling a significant amount of our business on monthly mode. That also, obviously, as you can imagine, the collection happens over a period of time. It will take about another two to three quarters for this to kind of normalize.
One last thing I wanted to add, while our Q4 call center cost, we did not grow it. Also, in our annual, the way we do most of our accounting, we have some volume-based targets and some volume-based incentive targets, etc. We do not account for them till they are hit. What that implies is a lot of them get backloaded towards Q4. You see some benefit coming from that also every year. It depends. This year, to be brutally honest, we missed some of our targets in the savings thing. Actually, our revenue from savings would have been a lot higher than it was. That is fine. You miss some, you get some. That is the way life is, yeah.
Got it. Thanks so much.
You can't predict growth too sharply.
Great, Yashish. Great year, and all the best. Thanks for the responses.
Yeah.
Thank you, Sachin. We'll take the next question from Madhukar Lada from Nuvama. Madhukar, please unmute yourself.
Hi, good morning. A couple of questions from my side. We are seeing a lot of changes in the health segment with IDI saying one-by-n, the whole method of reporting. Also, there is a lot of pressure and talks on deferring commission payouts for long-term health. I wanted to understand from your viewpoint, how has that played out in those negotiations with insurance companies? Second, given the pressure, I was also hearing that there is probably going to be some reduction on renewal commissions as well. Any comment even on that, if there are any talks going on and if we felt anything on that side.
Lastly, just on the expense structures, if you can just spell out how the expenses have been bifurcated, the employee, advertising, and the other expenses between direct, indirect, and existing and new initiatives for sort of our modeling purpose going forward. Yeah, these would be my questions. Thanks.
No, thank you very much for that question. I think, first of all, we should not miss the boat for the Greece, right? I think health insurance and health is a very simple area where the customer essentially pays a certain amount of money, and he basically expects his claims to be settled. Policybazaar is in a phenomenal position there because we have done very good disclosure assessment at the beginning, and it is always comparative, right? I am not saying we are perfect, but we are much better than many of the channels in terms of disclosure assessment. What that implies is our claims book is standing strong. What that means is the insurers are not getting surprises as much as they may be getting in some other channels.
Thus, we feel lesser pressure than maybe the market feels on both the claim settlement side as well as some of our payouts, etc., right? I think one of the things is because over the last three years, we have worked so hard on ensuring customers get their claims, some of our own renewal claims ratios will also start to move upwards, right? Because obviously, we were not able to put as much effort in that. We will be getting in the same range or maybe just lower, a tad lower than other channels because we are putting in that effort, but that is coming at a much higher claim settlement than many other areas. That is what is, in my opinion, allowing us to attract more and more customers along with our better sales training and better advertising, etc.
No, we are at this point not seeing, I'll kind of defer that to Sarbvir to kind of answer on those two, but that's how I think about it.
No, I think Yashish covered most of the points. The only thing I would say, which is probably not a surprise to you all, is that clearly now health insurers, like any other general insurer, are focused on the combined operating ratio. I think on that basis, our channel, I mean, if I were to summarize what Yashish said, our channel comes out in a fairly attractive end of the spectrum. Because of that, I think the pressure obviously will always be there for everyone. I think those pressures are much more manageable. At least so far, we do not see a change in our economic structure. The second thing I just add is that we are actively working on this subject.
It's not like we don't understand what these issues are, how to make sure that long-term renewal claim ratios are controlled, what else can we do, how do we segment the customer base better, etc., etc. We're working with our partners on these issues. I feel quite confident that this whole economic model will continue for us.
The conversations have got very evolved around how do you maintain claims ratios into the future, whether that means add-on products, whether that means slightly higher cross-sell, whether that means you work with different cohorts differently. As Sarbvir said, we are taking on a lot of effort and responsibility in that area. We are clearly maturing. We are not where we were three years ago in terms of our processes for both fresh and renewal. You asked about the different costs and the contribution margins, etc. See, if I look at last year, this whole year, our core margin is about 43%. That is very similar for both insurance and credit. It's not very dissimilar. It has stayed the same for both for a very long time.
Now, new initiatives, of course, have a very different—they were at the beginning of the year, they were at - 1%, and they kind of moved up a little bit. Last quarter, they were at 4%. Overall, they were at a 2%+ . I think that is the way it is. If you look at the core business, the EBITDA is about 14% +. It is a 16%+ for the year. It started at 14, ended at 22%. For the whole year, it is about 16%. At the EBITDA level, if you look at new initiatives, we are at about - 9%, started at - 12, ended at - 6. I do not think you should look at either - 12 or - 6. You should look at it always on a rolling basis. Right now, the 12-month rolling is - 9%.
Right now, the 12-month rolling situation is core is at 16%, and new is at -9%. Both are inching upwards clearly. I think that is what is important.
Madhukar, this is Alok here. Just on your insurance company and how they look at policy for every channel. For insurance companies, there are three basic costs. At a very, very high level in health, claims, which is roughly 70% of the cost, decision, which is roughly 20% of the cost, and OpEx, which is roughly 10% of the cost, and a blended level as an industry. Now, 20% is obviously a big cost, but it has to be seen in the context of the other 80%. Any company works with Policybazaar, because of very deep tech integrations, the OpEx requirements are very, very low relative to any other channel. Similarly, the claims on a blended book continue to be lower because we provide a lot more new customers to them. Overall, this is the most profitable and fastest-growing channel for all of these insurance companies.
The way our discussions happen with them in terms of new product introductions, all the innovations that we can do for the customer, the claims servicing part, everything continues to be very, very strong. Practically, short term, do not see any specific issue on these.
Yeah, very simple data point there. The industry, I believe, is at 23%. The retail health industry is at 23%, fresh 77%, renewals. Our fresh is still bigger than our renewals. I think that is a very clear indicator. If you really look at the claims ratios of the entire industry, forget us. If you look at the claims ratios of the entire industry, the fresh claims ratios are about one-third to one-fourth of where the future years lie. We are obviously important in the profitability of the industry and driving new volume to the insurers, which is what the game is, I guess.
Understood. No, this is helpful. Just a follow-up. Now, given that our base has increased significantly and our market share also in this health fresh premium is pretty high now, I know there is no sort of, it is a difficult question to answer. If you were to talk about sort of growth going into FY 2026 and 2027, maybe in the near term, how should we sort of think about that? Any changes over there?
See, if I look at our last five years now, as I said, our core business has been growing at a CAGR of 43%, which is ahead of my expectations, honestly. I thought we would be here from a revenue perspective. If you ask me in 2021, I thought we would be here maybe six months to twelve months later because I always think the revenue CAGR should be about 30% or so. That is what we have always thought. From a long-term perspective, we believe 30% is the right CAGR for us to sort of plan for. However, I am honestly being surprised by health. At the same time, let me kind of put it to you another way. We have a term business. We have a health business. I think term as an industry is about one-third of health.
For us, our fresh businesses in term and health are very comparable still. Of course, health is bigger, but they are still comparable. I think within our own setup, health has at least a doubling to go to catch up with term. If you—I should not say this—but if you brutally ask me, "Look, which of your teams do you think is actually sharper between term and health?" I actually feel looking at the last three to four years, our term team was actually sharper. That is a very—by the way, our health team is catching up very, very quickly and is becoming better and better. We have a way to go. I think in health, we have a natural right to win, which actually in term is far harder because in term, you cannot differentiate a huge amount in terms of claims settlement.
In health, you can, and we are doing that. I think in health, our right to win from a distribution standpoint is pretty, pretty clear. Actually, yeah, I shouldn't say that. I almost asked my team, "Why are there other channels?
Actually, one more thing here. We have always maintained that our growth rates will usually be about 2%-3% of industry growth rates, generally. That's what we maintain. In health, we seem to be doing it roughly 4x-5x of the industry growth rates on an overall basis for new business acquisitions. Now, see, the real win for Paisabazaar has been that the customers come to us, right? Customers come to us when they see any incidents happening in their circle, whether it's friends, colleagues, family. The reality is for a lot of young people, the incidence of hospitalization is much, much, much higher. A lot of people are coming to ask for these products now.
They actually feel that this actually serves a very big need at that stage of their life when they are 30, 35, 40, sort of age growth. Yes, health has done much, much, much better compared to other channels. Our growth rate, as we said, I mean, we always expected 2-3X, but this is sort of going 4-5X.
Yeah, if you're just looking for some kind of broad direction on various things, see, our health continues to do well, and we're feeling confident. In fact, I feel confident this will be so for the year or for a large part of the year, at least. I think our savings business at this point is very challenged. We are struggling to grow, and we're thinking very hard on that. How do we grow? Of course, there's a pensions area. There is a child insurance area. We are working hard at it. I think the good news is a lot of our—if you look at the last five years, our motor two-wheeler growth was a bit subdued for various reasons. That is solidly back. We are feeling confident.
If you really look at Paisabazaar over the last, I would say, even 10 years, it is always three, four of our businesses are firing. One or two are always struggling. That is the way life has been. Those three, four do enough to kind of keep us above the 30% on a regular basis. I think that is what you should think about when you kind of look at it. The good news is now we are also confident that the credit side is going to grow. We are seeing good month-on-month growth. We feel very confident that we should have a good future in the credit side.
Thanks, too, and all the best.
Thank you.
Thank you, Madhukar. We'll take the next question from Dipanjan Ghosh. Citi Dipanjan, please unmute yourself.
Hi. Good morning. I hope I'm audible. Just two small questions from my side. One, obviously, in the answer to your previous participant's question, you mentioned that savings is challenged. If you can give us some color on the savings contribution, either to premium or top line, or how should one think of it for FY 2025 or fourth quarter, that would give us some color on the trajectory that we should kind of focus or think of going into the next year. Second, you have kind of given some slides on PB Money, and it looks quite encouraging. I just wanted to understand your overall strategy from the next three to four-year perspective on the PB Money side and how you can leverage that to maybe further milk the customer or achieve a better cross-sell sort of ratio out there.
Sorry, Sarbvir will answer the savings question, and then we'll move over to Santosh for the PB Money question.
I think on the savings side, if you see the industry also, there was a sharp slowdown in the industry, especially in February and March with negative growth on the retail side. Our business, to some extent, reflects that in Q4. We think that based on what we can see, it will take a few quarters for this to move up or move away from where we are. We are planning that probably the first two quarters of the new financial year will also be quite slow on savings. As Yashish mentioned, we are focused on building new segments like pension. We are focused on bringing back products that have done well for us in these kinds of market conditions, like our Capital Guarantee Solution, etc. I think it will take some time.
X of savings, as we showed you, we stay in that 35%-40% kind of corridor. I think that should continue for the rest of or for the new financial year as well.
Santosh?
On the PB Money side, see, there are two reasons for why PB Money is, I think, critical for a business like credit. One, it allows deeper understanding of a customer's risk because, of course, over and above Bureau, you start getting data about the income of the customer, and you can do sharper underwriting. We've rapidly acquired customers on the PB Money side. That allows, of course, for more curated products and better risk. The other bit to this is that I think savings is a large area. We do a lot of savings through insurance on the policy side. There is an opportunity to do savings on the Paisabazaar side through bonds, fixed deposits, mutual funds. That opportunity exists. I think PB Money will be the backbone to use the data to advise customers on how to manage money better.
That should be a rapid area of growth for us this year.
Got it. Just one small follow-up. I mean, what would be the monetization strategy? I mean, would it be more product cross-sell or driving higher engagement and then trying to post-sell your existing product book? I mean, what would be the monetization strategy?
Monetization largely will come from selling this year, largely bonds and fixed deposits. Of course, it also helps indirectly in monetization because we have a better understanding of a customer's credit. Hence, it will lead to growth in some of our unsecured areas, lending areas. That is, I would say, a shadow way of monetization. Of course, direct monetization on bonds and deposits will exist.
Thanks. Just one final question before I kind of drop the mic. Any plans to go into broking or sort of entities?
We are, okay, so not in the way you are thinking about it, but what we just said, bonds, fixed deposits, these kinds of things, pension products, NPS, not in the traditional trading sense. That is not how we are thinking about it. Yes, from a licensing perspective, there may be some context to that. There is no decision there. Yeah, there are conversations internally. Just in fair transparency, yeah, there are conversations. Again, not from a trading perspective. It is much more from a long-term investment, long-term savings perspective.
Got it. Thank you, and all the best.
Thank you.
Thank you, Dipanjan. We'll take the next question from Shreya Shivani, CLSA. Shreya, please unmute yourself.
Yeah. Hi. Can you hear me?
Yes.
Yeah. Good morning and congratulations on a good set of numbers. Thank you for sharing your views on what's happening in the savings segment and health insurance segment. I wanted to get back to the protection segment. The industry as such has been seeing very strong growth for the past two years straight. Now, the monthly data, the monthly sum assured data indicates there was some moderation, not slowdown, but after two very strong years, there was some moderation in growth in March on the protection sum assured front. What is our understanding of how things are moving? I'm not talking about you being slower, but is the industry sort of moderating after two very strong years? That's my first question. Second, on your healthcare business, if you can give us what has been the updates. We've seen the disclosures on the exchanges.
How has our thought process evolved? Third, I'm not sure if you've given your breakup of premium across—okay, you've given those numbers. If you've given it across POSP and corporate, I know Dubai is 76% growth. That will be my last question. Thank you.
Sarbvir, why don't you answer that?
I think, Shreya, the sum assured that you are reading in the industry data is actually not directly reflective of term insurance in the sense that a lot of the sum assured growth for the industry has come from attaching riders on ULIPs to make ULIPs more attractive as the last couple of years have been about that. Actually, what you are seeing, the reduction in sum assured growth that you're seeing in Q4 is actually a reduction in the growth of ULIP rather than the growth of term. Term has largely, both last two years, in our opinion, has been growing—or not opinion based on the numbers that we know—has been growing in a very similar-ish, I would say, 12%-15% kind of range only. From a protection perspective, we are obviously growing multiples of that growth rate.
We do, and we are—through this, I'm appealing to the industry also—that all of us need to focus on driving demand for protection and growing the term market.
On the breakup you had asked for, you can make a note. Our core business is INR 16,144 crore for the year. POSP is about INR 5,000 crore. Corporate is about INR 1,000 crore. Dubai is a little more than INR 1,100 crore.
Okay. Thank you.
I'm sure this question will come next. On the core, new and renewal continue to get about 50/50. They are about half and half.
Got it. Got it. Yeah. And the healthcare, your thought process now, etc.?
See, what I would request on healthcare is it's a very long, drawn project. It will take a long time. I would give it enough space. The strategy will not change on a daily basis. The strategy is very, very clear. As I said, I think these are just nomenclatures. Who's an insurance company? Who's a broker? Who's a hospital? Eventually, if we think from a consumer's perspective, he's saying a very simple thing, "Yeah, give me 10,000. I'm giving you INR 10,000. Whatever happens to me, take care of it." That's what the customer is saying. The customer has a lot of pain in that process, right? See, I always say when you think long-term, think simple. The customer has a lot of pain in that whole sequence. We're trying to solve that sequence with all our efforts.
Policybazaar is doing some work at the disclosure front. The hospitals will do some good work at aligning with the consumer outcomes. In terms of, yeah, we've had the round. We've had the money come in. We've acquired one asset. We are looking at acquired in the sense we've paid for it. We've taken it over. We are looking to do the same with maybe three, four other assets. I think what you should see is we'll probably buy—if you look at the five hospitals that we are looking at in NCR, we'll probably buy two or three operating ones and two or three more like shells, which we are going to convert rapidly into operating hospitals. It'll be a combination of existing revenue and profits and new from-scratch builds. We've started bringing on doctors.
We've started bringing on people who know how to build hospitals. Even today, in our team, there are more tech people and product people than healthcare people. That is also a reflection of some of the things we are going to do in terms of wellness, in terms of basically what all you think of yourself as a customer. You paid INR 10,000. Now, you also said, "I'll pay INR 20,000. Take care of everything. Take care of OPD. Take care of every damn thing. Don't ask me for a bill. Don't ask me for a claim. Just if something goes wrong, just take care of it." I should have no pain whatsoever in this process, right? Of course, the physical pain will be there, but shouldn't have financial pain in this process. That's what we're trying to solve at a fundamental.
This is a big project. That is why I said, "Don't expect sort of any rapid changes." Of course, we are reviewing everything on a weekly basis, but don't expect any material changes in a very rapid manner.
Got it. Thank you so much. This is very useful and all the best.
Thank you.
Thank you, Shreya. We'll take the next question from Manas Agrawal Bernstein. Manas, please unmute yourself.
Hi, Yashish. Thanks for the candid answers. I actually wanted to ask two things on a medium-term/long-term strategy perspective. One is you're talking about propping up savings in various ways. One clear way to do it is par and non-par, where you don't operate on a large market in terms of time. One is thoughts on that. The second is slightly more philosophical on AI. It can affect both customer servicing and customer acquisition. Acquisition side, we've seen Google say search is changing. SEO will change as a function of that, how you guys are thinking about it. On the servicing side, we've started seeing some startups operate collections for banks using voice bots replacing call center operations. Is that a threat? Is that an opportunity? Wanted thoughts on that.
Sure. I will request Sarbvir to answer on the savings aspect. Of course, we have a view on this. I think our view—I'm quoting somebody else—I think our view is very aligned to [Mr. Rami Bakshi's] view: sell good products. We have a view on that. I have a huge amount of respect for the man. Sorry for bringing his name into it. I think when he changes his view, we'll also probably change our view. I would say, Sarbvir, if you want to answer that more specifically, and also the AI question, because I know we've been having these debates, we're on the same page on this here.
Yeah. I think the best way to think of it is that every channel and every distribution platform has its own set of, I would say, characteristics. Our characteristic is that we get customers who come—these are informed customers in general—and they are looking. They understand the difference between products, and they are looking for transparent comparison. If you see slide 41 in our deck, we have actually shown that the ULIPs that we are selling today are better than most mutual funds that are sold in the market. If you are willing to stay for the 10 years or the 20 years that the ULIP is meant to be. The products that we are selling today actually are extremely good products from a long-term saving perspective, which is the role, I think, of these products.
We believe that as the middle class grows, consumers will need to save for their goals, right? The goals could be children's education, general retirement, their own personal sort of pleasures that they want to save for. Of course, finally, there is a whole pension area where after you stop earning, you need to have enough money to live. I think if you think about it, we are more focused on the goals rather than just the products. We believe that we have to sell efficient products because if we do not sell efficient products, then the customer who comes to us will see through the issue and will be disappointed and will not buy more products from us. At this point, we are very clear. I do not want to go into par, non-par, etc. I think the main issue is products that make sense.
As long as the products make sense, we continue to offer them. Right now, obviously, we are largely a ULIP platform. We do sell non-par because in our capital guarantee solution, one part is a non-par and the other part is a ULIP. I think that's how that will continue. We feel quite confident. See, a couple of months here and there, I mean, in the first half of last year, we grew at over 100% in savings. I think we should not forget. I mean, a few months here and there is par for the course. Our team is creative enough, and we will figure it out again.
Absolutely.
As far as AI is concerned, I think we are right at the forefront of all these use cases that you spoke about. We do a lot of our collections through AI bots, agents, etc. We continue to, I would say, sort of stretch the boundary on this. We still believe that for sales, it is, especially in life and in health insurance, important to have a person explain the whole product in a very systematic and logical manner because you also want to elicit disclosure. If you do not elicit disclosure, I think you will go down a wrong path. I think that is what we continue. I can assure you that we have enough experiments going on in every area to look at what is the cutting edge, what are people doing, and how can we leverage that.
We firmly believe that in AI, what we call man in the middle is the right format where AI helps to improve the productivity and effectiveness of the person. That is what we have done on the risk side. I mean, I will not go into all of that. If you see our last couple of years, I think a lot of work has been done, which is leveraging the latest and greatest AI technology.
Just to kind of add to what Sarbvir said, already we have got what you call AI agents, if you would, who are doing initial warm-up, initial calling kind of across the group. That's starting to happen. When you think about AI, you got to think of it from what are we doing to protect the supplier? What are we doing for ourselves? What are we doing for the consumer? If you can take these three kind of buckets in a triangle, at least from a supplier's perspective, risk is a very big area that we are working on. We are trying to understand risk.
We are also, when you talk about ourselves, a big amount of the effort is both in terms of sales efficiency, reducing the non-talk time because there's a huge amount of time that the—and at the same time, empowering the agent with a lot of information, which is coming in terms of prompts or supports. That is what largely is being worked upon.
Just to add, our technology teams are now using a lot of AI to do their jobs. So a lot of, I think, technology costs can be saved in the future.
Sure.
Understood. Thank you.
Thank you, Manas. We'll take the next question from Srinath, Belwether Capital. Srinath, please unmute yourself. We'll take the next question from Rahul Jain, Dolat Capital. Rahul, please unmute yourself.
Hello. Hope I am audible.
Yeah, you are.
Yeah. Yeah. Most of my questions have been answered. Just two questions. Firstly, if you could share your thoughts on the increased receivable for this year. Any color on it? Going forward, what is the sustainable level of investment that can go in this? Secondly, which is just an extension of the previous question around AI, what kind of headcount optimization, purely from a call center perspective, one should see? Is it safer to assume that, irrespective of the scale of the business, the headcount growth could be much at a lesser cliff than what has been the last few years' growth on that part? Those are my two questions. Thank you.
I think it'll take—I’ll just answer your last question. I think things will happen. It'll take time, which quarter nobody can say. If you look at it on a year-on-year basis, if I look three years out, a lot of things would have happened. I see no reason why that wouldn't happen. The receivables is largely a one-by-N thing, which we explained will have some impact for the next—it’s already started having some impact. Now it'll have some impact for maybe a few more quarters. Then some limited impact, which will be limited to the multi-year policies and all that stuff. This is a cycle that will play out. We're not too fast about it in the sense, of course, we would wish it wasn't the case. It is the case. We have to kind of live with that.
Also, Rahul, when it comes to the deep tech, as you mentioned, there's an efficiency part and there's a risk part. Within the efficiency, see, as a company, anything that we do can have three types of impacts, right? Either we can work on improving the revenue or becoming efficient on the cost or better customer service. The biggest impact of deep tech for everyone, including us, is on the customer service because that can be automated to a large extent as we look for the next one to three years. This includes renewals, claim support, all sorts of endorsements, all sorts of service elements. Sales, specifically in insurance, is a very involved process. There are some parts of it which can be automated over time. Broadly, that will remain very, very close physical contact with the customer all the time.
If we look at the cost of sales operations as a total LTV revenue for us, it is roughly somewhere around 20%-25%. It is not a very big bother. Yes, we will do whatever it takes in terms of becoming more efficient. I think the bigger impact will come on the service side before it comes on the sales side.
We all have our own opinions. My opinion is over a three-year period, you will see a lot of impact in sales as well. My other opinion is I think consumer brands are very important in this. AI—okay, my view is AI is a commodity. Basically, consumer brands are going to be the differentiator because the human mind is still limited. Of course, we will have some impacts coming from this. As you hear, all of us have somewhat different views. That is the way it will carry on.
No, that's really.
Thank you, Rahul. We'll take the next question from Nidhesh Jain Investec. Nitesh, please unmute yourself.
Hi. Thanks for the opportunity. My question is on credit business. We have done extremely well on the insurance side. On the credit business, with the change in management team, how are we thinking on this business from a longer-term perspective? How are we trying to build a right to win in this business over medium to long term?
Santosh, please.
See, on the credit side, I think last year was a year of, I would say, moderation based on what happened in the industry. As we now scale back up, there are three aspects around this. One, that we will go deeper in the secured area. Secured, we started in the last five months, and it built up very rapidly. This year, we will expand the secured area. We will do home loans, loan against property, loan against cars. These are the areas we will expand in. We will also start savings area to deepen our understanding about a consumer. That also allows for better understanding of a customer's risk and means sharper underwriting, which will then help in scaling our unsecured lending. The third area is collections. Collections is something that we will focus on.
Deep collections capability, especially tech-led, will help us in, again, scale our unsecured side because that is, as we work with a lot of new NBFCs and fintechs, that capability is required. That should also help us expand our supply side on the unsecured lending.
Thanks, Santosh.
On collections, will we be investing in physical collections also?
Largely, right now, tech-led and tele-based collections, a lot of AI is going to get used in that area. We are not thinking of field on P2 Street at the moment. Again, as we get deeper into it, that may change.
If you kind of think about Santosh from a last 10 years' perspective, one of the things we've done is built a huge amount of risk capability in the Paisabazaar franchise, specifically on the life insurance side. Outside in, it may or may not be visible. Within the industry, it's quite respected. I think that allows our partners and our channel to be a little more profitable and a little more long-lasting than many others. I believe that's one of the things that Santosh also brings to this area. She is quite serious about thinking around risk and making sure that the right risk is picked up by the right organizations that they have decided to do. One of the things in that is you understand risk better when you're yourself collecting as well.
That is one of the reasons we want to move into that area. Especially some of the early fintechs may not have a lot of collection capability. Eventually, in this business, if your money is not being collected, then there is an issue.
Sure. We have also been experimenting with FLDG in the past, I think, last few quarters. Is there any thought process on that?
See, when we started FLDG, we started from giving some kind of guarantee. We did not really get into how we are differentiating on risk. I think that is what we are starting to do now. I do not know, Santosh, if you want to answer specifically.
No, absolutely. I think FLDG, I think our confidence on doing some of these FLDG partnerships will go up because we will start to—I think we are starting to understand risk better. That means responsible lending. Wherever we need to ask in the game to really go deep in this area. There, we're comfortable in doing these arrangements. I think that should be the right way of scaling our unsecured business.
Just to kind of explain our accounting policy on that, because that can be a cause of worry, our accounting policy is very clear. Whatever FLDG we take on, we write it off on day one itself. We provide for it. Sorry, not write off. It is called provide. We provide for it on day one itself. As and when we eventually come out of the woods, we kind of start considering it. We start with a zero base.
Thank you, Nidhesh. We'll take the next question from Neeraj Toshniwal. Neeraj, UBS. Neeraj, please unmute yourself. Hi, Neeraj. Please unmute yourself.
Hey, are you able to hear me now?
Yes, yes. We can.
My question is on the contribution margin. The expansion contribution margin is quite decent. I wanted to understand, has there been any reduction in incentive pay for the POSP agents in this quarter, which has helped increase in contribution margin? That is the first question. Second question is on the cost. Employee cost has gone down, so has advertisement, while other expenses have increased significantly. If you can throw some light over there, that would be helpful. Yeah.
See, Sarbvir can answer more specifically. I would just say, please do not look at anything quarter on quarter because we should just look at it on a 12-month rolling basis. That will give you a much better picture. Otherwise, sometimes you will see the impact of incentives from other places, etc., playing up. That is what I always said. Sarbvir can specifically answer that.
Yeah. I think Neeraj explained in the beginning of the call that we have been growing our call center capacity or our sales capacity over the year. In Q4, obviously, we kept that flat. That is one of the reasons why our contribution margin, apart from some extra money, etc., that you may get at the end of the year. I think that is the main reason. I would, again, encourage you to look at it on a rolling basis, as Yashish explained. As far as the POSP part is concerned, I understand there was some media article on the issue that you were referring to. The facts of the matter are that we have always been very consistent in offering a very attractive opportunity to POSP agents. The real trick is not in terms of trying to reduce the margin.
The real thing is to work with smaller agents whose incomes are getting enhanced by working with PB Partners. I think that is the journey that we are on. That journey is getting better and better, because of which the overall mix will also improve and our contribution will improve. It's not really about reducing payouts. It's about optimizing payouts and the right set of agents to work with. I think that's really where this whole thing has come from.
Sure.
This is structured. This will continue in the coming quarters as well.
See, I'll explain here. There is some structural aspect to it. There is some quarter aspect to it. When we speak about the POSP business per se, there is an easy way of doing POSP. There is a hard way of doing POSP. The easy way of doing POSP is you work with large POSP people who are themselves, in a way, POSPs. You get bulk volumes, right? If you notice that, the one way to check for it is how many employees do you have for every business done. You do require people to manage agents also, however tech-driven you may be, etc. You do require people to recruit agents, manage them, etc., right? That ratio is quite telling.
The second way is to actually get small, small agents and get them to do more business for you and more types of business for you. That is hard. It actually is not something you can do just through remote control. You do need to—you can only manage, a person can only manage a certain number of agents. Those people also need to be trained hard and trained well to do it. We are very clear we are down that path. We cannot answer for the whole industry. For us, we only value that part as the only thing we kind of look at. Now, on the various things, just look at 12-month rolling, and you should be fine. I do not think you should see any material change from a 12-month rolling perspective. Of course, structural changes are there, as I said.
Renewals growing. See, our health, fresh, if I take a five-year view, cannot keep growing at this rate. Our renewals can. Obviously, the margins will come at some point. I'm saying five years.
That is helpful.
One to two years. Yeah. Thank you. Thanks, Yash.
Thank you, Neeraj. We'll take the next question from Sanketh Godha , Avendus Sp ark. Sanketh, please unmute yourself.
Yeah. Thank you for the opportunity. Yashish, the way I understood it, this is just a clarification. If you have sold a three-year long-term plan on health, though the insurer is paying commission spreading over three years, you are recognizing three-year commission upfront. That's the reason why the receivable number has gone up. That's the understanding, right?
That's the understanding? Yes.
Yeah. You're right.
Yeah. Just to follow up on that point, out of the total health, whatever we do, how much portion would be contributed by long-term?
I think we would not like to disclose that publicly.
Okay. Okay. Fine.
It's a pretty steady number. All I wanted to say was it was similar last year. It was a little higher than that. The multi-year plans were a little higher than that two years ago. Our growth is not explained by that. That's all I'm trying to explain. Don't get the wrong impression. Yeah, we don't want to disclose that number.
Okay. Perfect. Perfect. The second question was that the contribution margin of the new initiatives, which improved, is it fair to say that, as you highlighted in the initial comment, that UAE turned profitable and that contributed to the margins to improve? I mean, the biggest delta came from there? Or the POSPs and the corporate segment also did relatively well?
See, from a profit perspective, at this stage, I just want to be very specific. At this stage, UAE is quite not that material in the whole scheme of things, right? UAE, from a loss or profit perspective, would probably explain 10% of the entire, or maybe 20% at best, of the entire piece. I would not go there. Now, it has the potential of—I would say if you take a three, four-year view, then it does have the potential of being a big determinant of profitability because that is actually like a core business. There is nothing non-core about the UAE business. It is exactly what we do in Policybazaar. Our corporate business and our POSP business, on the other hand, are somewhat different. What we are hoping is that in the next two years, they get—and again, we do not plan for these things.
We believe they should come to somewhere around zero in the next two years, from a break-even perspective. That is a journey. It may happen one quarter. We are constantly on that journey slowly. I do not think there is any very quick aberration in that. Yes, UAE has surprised positively with its profitability, but it is not having a material impact on the overall piece yet.
Okay. Got it. One data-keeping question on the credit side. That means if you can break up that INR 7,652 crores and INR 20,460 crores into new initiative disbursements and the core, that would be useful. Lastly, if you can spell out the adjusted EBITDA margin for the credit business in the quarter.
See, on the new initiatives, I think those are scaled up over the last five months. For the year, roughly, new initiatives contributed to 40% and core is 60%. That is for the year. For the quarter, it will be roughly 70/30. I think new initiatives is a largely pass-through kind of business from a revenue perspective. That is why you would see that, though year-on-year, the disbursals went up by about 38%, the revenue shrunk by about 14%. And that's what this.
Lastly, I would say.
Just to be clear, our new initiatives in Paisabazaar are at a very, very early stage right now. It is largely lumpy in the sense what I said right now, right? Easy POSP, hard POSP. Right now, it is the easy POSP, right? We want to be clear about it. Do not assume we have got a hard POSP done in Paisabazaar yet. We are starting that journey now. The journey we started in Policybazaar maybe two years ago. Initially, the first year, we also had easy PSP there. After the journey we took on two years ago, and it has been a constant shift towards more and more granular agents, that is a journey we are just starting out right now. Right now, it is almost zilch on that front.
Understood. Lastly, if you can spell out the adjusted EBITDA margin of the credit business.
Yeah. What is the adjusted EBITDA margin on the business? It's 7% for the year.
Okay. Okay. Perfect. Thank you very much. That's it from myself.
Thank you, Sanketh. We'll take the last question from Srinath from Bellwether Capital. Srinath, please unmute yourself.
Hi, guys. Just wanted some qualitative feedback on persistency of the health renewal books. If you can give some qualitative understanding as to how the older cohorts are doing and the newer cohorts are doing over a year-on-year basis or six-month basis, any qualitative feedback you can give on persistency of renewals, that'll be great. Thank you.
The qualitative answer is always well. Sarbvir will answer in a more specific manner.
Yeah. I think we are really proud that we are at all-time highs. We look at persistency in two ways. I mean, as in we look at it always on an NOP basis because that is the most important thing, the number of people who stay with us. The first-year renewals we call R1. Our R1 persistency is at all-time highs. We have never been at these levels. It is largely structural because it is driven by the nature of the products that we have been introducing. Over the last two years with our insurance partners, we have introduced products that have very high no-claim bonus. Every year, your no-claim bonus increases dramatically. When you come for renewal, your comparison with the outside market becomes very different. Your current product looks very superior compared to anybody else because of the sum insured that you have.
Our first-year persistency has increased a lot, and we are at all-time highs. Our R2 plus, which is second year and beyond, is very consistent. It has largely been very steady over the last few years. Overall, if you see, our persistency is at all-time highs, both in terms of number of policies and even in terms of premium. I think the most important thing is the number of people who stay with us.
Perfect. Thanks. Thanks a lot. Congratulations again, guys. Great set of numbers.
Thank you very much. With that, we will close today's session. Thank you very much for attending. I look forward to interacting with some of you over the next few weeks. Thank you. Bye now.