What’s brewing at PB Fintech? That’s the question many are asking this past week after the release of a curious report by Mumbai-based Trudence Capital.

The PB Fintech analysis by Trudence questioned past revenue recognition practices by the company, as well as the role of Paisabazaar, PB Fintech’s lending arm, and even allegations about misleading analysts and investors in post-earnings calls by PB Fintech.

In a report titled ‘Premium Promises and Discounted Truths’, Trudence claimed that since March 2023, there has been a sharp increase in total commission paid to insurance distributors to secure new customers. In the following fiscal year i.e FY24, PB Fintech saw a three-fold jump in brokerage commission earned.

But this does not track with what the company’s management has told investors and analysts in public disclosures, Trudence claims. So where exactly is the gap?

The Revenue Muddle At PB Fintech

But surprisingly, PB Fintech chose to downplay this growth in back-to-back post-earnings calls, first in Q4FY23 and then in Q1 FY24. Both times, CEO Dahiya told analysts there was very minimal impact on revenue from these changes and the take rate for PB Fintech did not see any material shifts or changes.

However, the financial disclosures for PB Fintech show quite a different picture. In FY23, the total income including commission and outsourcing income came to INR 1267.85 Cr or 10.9% of total premiums collected, but this increased to INR 2,750 Cr or a commission take rate of 17.3% on the total premiums collected.

It must be noted that PB Fintech’s Policybazaar is the largest digital insurance aggregator in India.

Clearly, there was a broad jump in commissions, so why did PB Fintech claim that take rates did not have a material shift in early FY24?

Trudence believes that the key to understanding this lies in PB Fintech’s Paisabazaar business, which is its lending vertical.

This revenue stream grew from INR 188.3 Cr in FY21 to INR 1,224.9 Cr in FY23, before somehow plummeting to INR 585 Cr in FY24, despite higher disbursals in FY24. This is largely down to a massive decline in online marketing and consulting income, by 95% or around INR 800 Cr (see below).

Given this, the PB Fintech management commentary on take rates........

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