Shares of Policybazaar parent PB Fintech closed 7 percent higher on March 18 after brokerage firm Kotak Institutional Equities upgraded its rating on the stock to an 'add', citing strong growth expectations and cheaper valuations.
KIE assigned a price target of Rs 1,525 to PB Fintech, translating into an upside potential of nearly 13 percent from Monday's closing level.
At close, shares of PB Fintech traded at Rs 1,450.85 on the NSE.
Kotak noted the sharp correction of nearly 36 percent in the stock within the last three months due to concerns around PB Fintech's growth and profitability, largely stemming from its healthcare foray. However, the firm remains assertive on PB Fintech’s ability to deliver 1.8-2.0x industry-level growth, with improving leverage driving strong profitability.
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As for the company's flagship insurance business, Kotak believes that Policybazaar remains a dominant insurance brand in India, commanding unmatched mindshare. "While insurance is typically seen as a push product, PB Fintech has strategically combined pull and nudge tactics to drive need-based sales, establishing itself as an indispensable partner for insurance companies," the firm said.
Meanwhile, the correction in the stock also revolved around concerns over PB Fintech's benign competitive intensity in the life insurance sector after surrender value and EoM (Expenses of Management) guidelines drove non-life insurance companies to cut commissions.
However, Kotak sees PB as a powerful and indispensable franchise, requiring minimal insurer support compared to agency or bancassurance. As a result, it is well-positioned to secure superior commissions. "Additionally, the EoM guidelines effective FY24 have enhanced flexibility in earning commissions, rewards, and incentives," Kotak believes.
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