Policybazaar parent loses Rs 31,400 crore in market value in two days
IRDAI's proposal to cap insurance commission rates triggered a 40 percent share slide at PB Fintech over two days, erasing Rs 31,400 crore in market value.
Policybazaar, India's well-known insurance web aggregator, has suffered a major setback in the stock market. Shares of the company, which has built a distinct identity in the insurance sector over the past 18 years, fell sharply in just 24 hours, wiping out about Rs 31,400 crore of the company's value.
September 24 and 25 proved to be very bad days for Policybazaar. Over these two days, the company's shares fell by as much as 40 percent. Insurance regulator IRDAI put forward a proposal that also hurt Policybazaar's parent company, PB Fintech, and other financial companies. As soon as the proposal came out, investors began heavy selling of shares in these companies, but Policybazaar's shares were hit the hardest. Within two days, PB Fintech's shares fell sharply and the company's market capitalisation dropped by Rs 31,400 crore.
Shares of PB Fintech, the insurance distribution platform, saw heavy selling on Thursday because IRDAI has proposed major changes to the entire economics of insurance distribution. In simple terms, the proposal recommends capping commission rates in the insurance business, which has raised concerns over the future earnings of insurance aggregator companies.
Policybazaar's entire revenue model rests on commissions received from insurance companies. The regulator's proposal is feared to significantly affect the company's revenue and profit. Brokerage firm Jefferies has said that a 10 percent cut in commission rates could lead to a 10 to 12 percent decline in PB Fintech's total revenue.
Policybazaar, counted among India's largest insurance web aggregator companies, was founded in 2008 in Gurgaon by three friends, Yashish Dahiya, Alok Bansal and Avaneesh Nirjar. The company initially aimed to provide an online platform for buying insurance, and Policybazaar grew from there as an online broker. Over the past 18 years, PB Fintech has transformed itself from a single insurance marketplace into a large financial platform services company, with operations that include agent-based distribution, corporate insurance and business in the UAE.
