Brokerage firm Macquarie has initiated coverage on PB Fintech Ltd. with an underweight rating. The firm believes that the market is underestimating the risks coming from Bima Sugam, which can be a potential disruptor.

Share Market Live

NSE

Bima Sugam is touted to be a one-stop shop electronic insurance platform, which will be akin to an e-commerce platform.

Macquarie has a price target of Rs 560 on PB Fintech, which is a potential downside of 26 percent from Tuesday's closing levels.

The brokerage mentioned their channel checks revealed that the insurance regulator wants Bima Sugam to be a UPI moment in the industry. For PB Fintech, Macquarie sees an impact in the form of lower take rates and lower market share from financial year 2025.

A take rate refers to the fees that online marketplaes like Amazon or third-party service providers charge for enabling third-party transactions. Simply put, its the amount of money a business makes of a particular transaction.

Macquarie believes that the target market for PB Fintech is likely to be much lower than what the market thinks. "PB Fintech already has 25 percent market share of its addressable TAM," the note said.

Explaining its underweight stance, Macquarie said that questions over PB Fintech's target market potential, POSP business remain.

The brokerage's earnings estimate for the company for financial year 2027 are 25 percent below consensus and 30 percent below the management guidance.

At 48 times financial year 2027 price-to-earnings, Macquarie called PB Fintech's valuations expensive.

PB Fintech, the owner of PolicyBazaar and Paisabazaar reported June quarter results in which the company's net loss narrowed compared to last year. It also reported an operating profit compared to an operating loss last year.

Macquarie's underperform rating is the only underweight / sell rating on PB Fintech based on the data from Bloomberg. Out of the 13 analysts, 11 have a buy rating, while one analyst each have a hold and sell rating.

The brokerage had earlier issued a similar underperform rating on Paytm on the day it listed in 2021. The lowest price target that Macquarie had on Paytm after a slew of cuts was Rs 450. Paytm made an all-time low of Rs 438 before reversing from those levels.

Shares of PB Fintech are trading 3.9 percent lower at Rs 730.25. The stock has risen nearly 60 percent on a year-to-date basis.

First Published:Aug 9, 2023 9:53 AM IST