PB Fintech Limited (POLICYBZR) Earnings Call Transcript & Summary

Good afternoon, everyone. This is Vijit Jain from Citi Research. Welcome to PB Fintech 4Q FY '22 Earnings Call. From the management at Policybazaar, we have Mr. Yashish Dahiya, Chairman, Executive Director and CEO, PB Fintech; we have Mr. Alok Bansal, Vice Chairman and Whole-Time Director, PB Fintech; Mr. Sarbvir Singh, President, Policybazaar; and Mr. Naveen Kukreja, CEO, Paisabazaar; and Mr. Mandeep Mehta, Group CFO. I'll now hand over the call to Yashish and Alok for opening remarks, and then the operator will open it up to Q&A.

Thank you very much. Good afternoon, everyone. Before I get into some of the details, I will still take a minute to highlight a certain unique characteristic about our industry. The salient fact about Policybazaar is that our customers come to us on our website or app to research and buy insurance. While this is a very normal thing in most industries, it is unique in insurance, because in insurance, it is a fairly intensive effort -- intensive sales process where people physically go and scout for customers, and that is how a bulk of insurance in the country is done. The productivity of these people who go and physically scout for business is typically under about INR 100,000 per month, while -- for us, the same productivity is upwards of INR 1 million per month. And the primary reason for this difference in productivity is not because we have any super humans in our system who are doing something very different from the physical agent. It is just the inbound nature of these consumers because once the consumer comes to you, his conversion rate is much, much higher because he himself or herself decided to purchase the product. Further, the customer who researches and buys has high disclosure levels, and lower churn. They usually know what they are buying, so don't feel the need to churn as much. This allows us to build a high-quality book for our partners. Better customer segmentation and data analytics allow for continued improvements in conversion rates, risk assessment and fraud detection. We continue to lead digitization as well as product and process innovation for the industry. This is reflective in the 84% CSAT, which has grown well over the last year, owing to our efforts in the area of customer service and claims assistance. Just to give you an idea of the scale of some of these operations, we now have more than 150 people providing claims assistance alone, and almost 2,000 people providing post-payment customer service, including on-ground support in over 100 cities. All these costs of all these people are included before we calculate our contribution margins. Our core business, the insurance marketplace, Policybazaar, and the credit market Paisabazaar, combined grew at 45% year-on-year and brokeeven for the quarter with an adjusted EBITDA of INR 10 crores, and we will continue this journey of higher and higher profitability and growth. Out of the total revenue, credit-linked revenue was INR 215 crores for the year. For our insurance business, we had an adjusted EBITDA of INR 28 crores for the quarter. We mentioned about extending our customer connect beyond the remote calling which we have historically followed. We did this in our last quarterly call. We are happily -- happy to mention that consumers have accepted this wholeheartedly, and the early results are encouraging. Customers can research online for -- and for complicated products like health insurance or investment products, they have the option to have a physical meeting at their convenience and in their local language. Currently, we are taking physical meetings in 57 cities in 12 languages. The cost of this entire expansion is also built into our core business contribution margins. Our renewals book provided INR 222 crores of revenue in the last year. And most of this [ work ] flows directly to the bottom line. The renewal book is built on the cumulative business done over the years and will continue to grow. We also had INR 88 crores of deferred revenue on 31st of March 2022. These are revenues from customers who have chosen to pay by a non-annual payment mode. So while most of the -- not while all the efforts from our side is done because the customers' payments will come over the remaining part of the year, we will be recognizing this revenue over the coming quarters. We also recognize that there are opportunities beyond our core business. And thus, we have 3 new initiatives. We are happy to say we have built rapid scale in leads and leadership position. PB Partners, our POSP venture, grew from a 0 base in July 2021 and did over INR 200 crores of premium in March '22, making it the clear market leader in the category. PB MSME and corporate insurance vertical, along with our investee company, Get Visit, has built a very well-regarded platform for enhancing engagement and service capabilities with MSMEs and corporates. They now have 1.5 million customers being serviced. PB UAE has achieved market leadership in some categories and a close second in a few others. And it's growing much faster than the market leader, so should be a market leader soon. We continue to be convinced of the opportunity on all 3, perhaps even more so than in the past. However, growth now onwards will be balanced with higher efficiency. You would appreciate that as we have mentioned, these businesses from a revenue perspective, have grown about 37x in the last 1 year. That is very, very rapid expansion. And I think expecting both efficiency and such expansion to go hand in hand is a tall order. And thus, there will be a higher focus on efficiency going forward. Another important point to note is that we have more than INR 5,000 crores in cash reserves, and we are very well capitalized to, of course, invest in these initiatives and take them towards fruition. Our belief is that the cost of these investments will be less than the interest that we earn on our cash reserves. Paisabazaar continues to be the leading credit marketplace and has rebounded strongly from COVID. We have improved contribution margins over the last 2 years and thus are now chasing scale to breakeven or rather chasing breakeven through scale. We now service over 27 million customers with the Credit Score program and have been able to sharply segment for creating preapproved products. The business is also cocreating products with partners in loans and credit cards to expand credit coverage and digitize processes faster. Given the rapidly changing times, we actually recently went out to some of our investors, representing more than 90% of our shareholding. And we are very glad to have received the feedback from all of them. And also very happy to share that their feedback has been incorporated in our thinking and our direction forward, which we have presented today to you. We want to thank you all for the support and candid feedback. I'm very happy to take questions now.

Operator, can we read out the instructions for Q&A and then open it up to that?

[Operator Instructions]

Can we unmute the line of Arpit Shah.

Congratulation on good set of numbers. I actually have three questions for y'all. We have seen a very large increase in our revenues despite the premiums remaining same. So we saw INR 540 crores from INR 386 crores in last quarter, whereas the premium has stood at INR 2,200 crores broadly for this. So we saw a very big jump in revenues despite the premium remaining same. So what are the reasons for that? That's my number one question. My number two question is how do we make money in PB Partners and PB Corporate? What are our typical take rates? And what is the typical unit economy that we are following over there? So what kind of expenses, direct and indirect, we have in those businesses? And how -- what kind of revenue we share with our agents that we have for our POSP business? And my third question is can you share the direct and indirect costs for employee expenses and marketing expenses for FY '22?

So Sarbvir will be taking those questions as it relates to Policybazaar.

Yes. I think the first question that you had was around the quarterly change in revenue. That is largely because the mix has changed. So last quarter, we had a higher share of corporate revenue -- Corporate EP in our mix, corporate business typically has lower margins. And in this quarter, we have a larger share from PB Partners, where the revenue margin is much, much higher. So that is the reason why it may appear to you that the revenue has grown much more rapidly sequentially than the EP has grown. So that was point one. Point two was on unit economics of Corporate and PB Partners. The Corporate business tends to have lower take rates. I don't want to go into the specifics right now, but they have lower take rates. They also have higher fixed costs. So what happens over time is that as the book improves and especially as the retention, see, corporate was -- the first full year of operations for us in Corporate was last financial year. So as our retention book goes up, you'll find that the fixed cost will remain largely -- will not grow as fast as revenue, and that will help us cover the cost and we'll have profit over time. You must also appreciate that the corporate business, we have some very well-entrenched players who are large brokers working around for a long time. So it will take us some time to break into these accounts and win those businesses. The second part of your question was around PB Partners. Here, at this point, the take rates are quite attractive. However, we also end up as we establish the business, paying our agents also relatively well. This dynamic will change as we go along. And now we have almost, I think 30,000 plus agents who are sort of POSP partners. Now as we go forward, these agents will start again building a renewal book and will start becoming used to working with us on our platform. As that happens, the take rate or the amount that we have to pay them over the -- what we get paid will start reducing. And you will see that in succeeding quarters now that our volumes will remain where they are, but the losses will start to come down.

On your question on direct and indirect cost of people, see all costs that are related to a transaction, whether they be sales, service or claims support when they're related to -- if the number of transactions go up, we need more of that particular cost. Those come under essentially your pre-contribution margin costs. And your other people costs will be those costs which are -- if our business grew 20%, they don't need to grow -- they may not grow at all. You may even see them sometimes growing without business growth. So they are not related to business growth. Of course, at some level, they are, in the sense if you become 10x larger, you might need a larger team to manage things, you might need some more HR people, et cetera. But they are not -- you appreciate, right? So the direct cost is the one that is related to volume and the indirect cost is the one that is not related to volume, and that's how we've kind of broken it out.

Okay. Just one last question. I just wanted to ask you on; like today, we are at an ARR of INR 9,600 crores on the premium so at what scale the J-Curve will start [indiscernible] like if I said EBITDA positive gross of ESOP cost, at what scale would it come at INR 15,000 crores premium, INR 20,000 crores premium or INR 25,000 crores premium. At what scale you will see that J-Curve happening in your business?

So I don't know what you mean by J-Curve, but I believe what you are saying is at what stage do you start to breakeven, et cetera. See I will not speculate on the future, but I will -- we, of course, have our internal understanding of how this goes. So if you think about it, our margins are today at about 40% and my -- we are fairly confident this will inch upwards into the future. I don't talk about 1, 2 quarters. I say when some of our things that we are talking about, like our physical people who are servicing in the physical appointments, et cetera, are well embedded, I think there'll be a significant increase in that margin. So you're going to get contribution margin increase from 2 pieces. One is the scale of the business going up. And the second would be the contribution margin itself going on -- going up on the existing business scale. So both of those will come in. On the ESOPs, I think we explained quite well that, over time, the quantum of those ESOPs will keep coming down because we are having a bit of a pre-accrual of those that because of our reporting, we shared that we are taking on 46% in the first year. So I think by the time you get to the second, third, fourth year, they start to become quite small relatively. So I think those ESOP costs will become smaller over time. I think if you wanted a direct answer to the question, if I was to just say, if I look today, we are at a contribution of INR 470 crores. And our -- I'm talking adjusted EBITDA right now because, as I said, the ESOPs will not stay at the same level as it is today. But the loss is about INR 111 crores. So I think you want only 25% to 30% more scale to cover it. So my guess is when this contribution is INR 600 crores, it would have crossed over the EBITDA loss at the adjusted level. And as the ESOPs reduce, they'll become less and less critical. Now why am I confident of that, we obviously have our renewal book, which is continuing to add on. And we are also extremely confident. This activity we are doing of putting people who can meet people is having very good results for us in terms of premium per inquiry going up and the overall direct cost as a percentage of revenue coming down. So that gives us the confidence. Plus, we will also be rationalizing on our initiatives. Look, this was our first year of initiatives, and you would appreciate that going from 0 to the scale that we achieved in the last quarter with INR 150 crores of revenue from new initiatives. That obviously means that speed would have lacked some efficiency. So we will be correcting that. So I think those multiple pieces will take care of this profitability. Honestly, it's not something that I would worry about too much in terms of okay, when does it become profitable? I honestly wouldn't worry too much about it.

And Arpit, the renewal book becoming bigger and bigger, [ lest ] our deferred revenue coming in, that probably closed down the bottom line. When we take a decision, the management team and the Board, we typically look at these revenues to have been already accrued when we look at the cost side [indiscernible] but obviously, from accounting perspective, these will flow over time only. And as investors and analyst, our request is to look at the total value of that transaction of many effort has already been put in.

The next question is from the line of Sachin Salgaonkar.

Sorry, my answer was slightly wrong there. I just wanted to clarify to you that the adjusted EBITDA loss was INR 282 crores. And so what you're talking about is maybe about a 50% higher growth. We will take care of it because we don't expect the initiatives, the new initiative losses to be growing, yes? Okay. Sorry, please go ahead to the next question.

Congratulations on a good set of numbers. I have one question and one follow-up, perhaps to Yashish's opening remark. And a follow-up question to the opening remarks is, Yashish, would like to actually understand in terms of what you meant by higher focus on efficiency? Would that mean that perhaps slightly lower growth, but in return, perhaps a faster part to breakeven? And does that mean that at some level, is it possible for you guys to give a guidance. The other listed fintech has given a time line of breakeven on adjusted EBITDA. So if you have something like that? And the question is, if you could guys could help up a bit of a breakup in premium this quarter between, let's say, autos, general, corporate, life, et cetera?

So you are right, efficiency means that. Efficiency means on the new initiatives, you are unlikely to see the growth that we have seen in the past, in the new year. Now we are not talking about the existing business. We're only talking about the new initiatives. And yes, you will see us identifying, which we have already done quite a bit of, which areas within the new initiatives, we want to grow, which areas we want to curtail, et cetera, et cetera. And so you will see all of that come through. No, we will not be giving a guidance in terms of when we will -- we've decided and our Board has not allowed us to give a guidance in terms of when we become EBITDA positive. So we will stay with that. And I don't think we are giving the breakup of how much we do in auto, general, life, et cetera. We have decided not to do that. Please appreciate, we operate in a competitive environment. And these calls and their recordings are also heard by our competitors. So we have to be careful about how much we disclose.

And Sachin, if we look at the profitability for the quarter, the core business already was profitable in the last quarter. This business is established over the years. The business model is almost set. So we can now work for more and more continued margin on this one. It is an initiative which we believe will be important going forward as where we want to invest. And as Yashish mentioned in the opening remarks, with INR 5,000 crores plus of cash balance, it will be not prudent for us not to invest in new opportunities, whether it's POSP, whether it's corporate business. These are large opportunities, and we are mindful of how much we invest, but trying to keep it to a level where -- these are very very near to our interest income actually.

Yes, and that is not by design that just so happens to be the case. If things need to change, of course, we will keep everybody informed and things will change if they need to change.

The next question, there's a question on the text, so I'll just read that out for you, Yashish, Alok. What would be the broad take rate on renewal premium. This question is from Divjot Singh?

We don't disclose the rates, I'm sorry about that.

Sure. The next question is from the line of Arjun Vikas.

But that said, it's common knowledge, right, what take rates. See everybody in the market knows what take rates are for the different lines of businesses. So I think this is common knowledge. It doesn't need to be explained.

So -- sir, sorry, I think the question was if I was not clear, I think it was on renewal premium specifically. I don't know if that changes your answer.

We've disclosed the renewal revenue. I think that means -- I know I get it, Naveen. So we've disclosed the renewal revenue. Most of it is Health -- the revenue, most of it is Health. So you can calculate the amount that you need for health. The rest you don't really need to matter. The rest of it is very low renewal revenue. So don't worry about it.

The next question is from the line of Sachin Dixit.

Congratulations everyone for the great results. I just wanted to follow up on the renewal part itself. So I do understand that renewal rates would matter. So if there is any color on the renewal rates that you guys are seeing or how they have been trending over the past few quarters? Secondly, on the contribution margin that we talk about in renewal revenue, which is like 90% plus. My understanding was that probably you will need to spend some money on performance stuff like messaging, e-mails and all. And the take rates might also be slightly lower. And if I also bake in some payment [ hit ] with charges, I'm struggling to come up with that 90% number. That's my first question. I'll follow up with the next.

So just to explain, renewals, don't just do renewals. Renewals also have up-sell and cross-sell that happens with it. So many of those costs get covered in that up-sell and cross-sell at back. To be brutally honest, our renewal effort pays for itself in terms of the additional premium it generates over and above the renewal that happens. So I would encourage you to -- if you -- the way we read it, I would encourage you to stay with that thought of a pretty high contribution margin on the renewal side. On renewal growth, see, this is mostly health business. And so it is related to what health we did in the past. Our renewal rates haven't changed. I don't know if Sarbvir you want to -- in fact they've grown, our renewal rates have gone up by about 5%, 6%. Sarbvir, why don't you answer this?

So Sachin, what we are seeing is, as Yashish explained, the renewal book is -- value of the renewal book is largely from the Health business. And in our Health business, we have a lot of focus on both first year renewals and later stage renewals. And both those numbers are going up. So we have done a lot of work, a lot of work that we have done on the customer experience front, helps improve the renewal rate. So there is a clear trend upward. We have also become better at cross-selling other products to the renewal base. So overall, the renewal story is continuing to strengthen as we go around. And as you can imagine, there's a lot of focus in the company on that stream of revenue. So I think you will find it going in the right direction.

And you know, the last 2 years with COVID, if we talk and every -- understand each quarter and how its movement compared to the last quarter or the last year same quarter. So as Sarbvir mentioned, it's a very, very high priority item for us. The customer already bought in the first year, which is a heavy lift we have done. And we would not want customers to let go of the renewal benefits. And so we obviously do whatever we can in terms of reaching out to the customers and helping them continue with the policy.

See guys, we are not trying to be cagey about this renewal piece. It will cause more confusion if we give you answers because there is Life renewal, there is Motor renewal. They have very different take rates, sometimes Life renewal, our recording philosophy on Life renewals has been changing over time. So all I'm saying is we could spend the entire conversation discussing this and it will -- the more answers we give the more confusion it will cause. So just stay with the fact that a bulk of it is Health, and in Health, yes, the take rates are about 2/3 of what they are for fresh business. And that will give you, like I say, bulk of it, more than 90% of it is Health here. So don't worry about the rest. The rest of it yes -- the renewal may happen, may not happen, but doesn't really matter. Like from a commercial perspective, of course, it matters too.

There's another question on the text. I'll just read that out. Can you please talk about what is the moat and right to win for Paisabazaar? And the related question to that, your competitors like Turtlemint, [indiscernible] et cetera, have also raised capital. Will there be telecom sector like [ price-led ] competition in POSP business?

So we don't comment on competition, and we will hold our cards close to our chest because we wouldn't want competition to know what we are going to do. But yes, we are in the market, and we are the market leaders there. Naveen will answer the question on the Paisabazaar.

Yes. On the moats, in fact, we've -- in the presentation, if the person has seen the presentation, on Page 31, we talked exactly about that in terms of what moats are we working on, namely scale, economies of segmentation, Credit Score platform, the way we are digitizing the business and focusing on co-creation and brand. In terms of scale, if I talk about it, we are at INR 9,150-odd crores of annualized disbursal run rate. We are not a lender, we are a marketplace. But if we were a lender, we would be in the top 20 lenders. So when scale comes, our ability to -- works even more strongly with the partners, working closely with them to co-create the products that we are creating, which are better -- with better processes and better consumer experiences. We are deep into the credit segment. So because we get consumers across the credit segment and because we're able to now build products across the segments, we are able to monetize much better than any single individual lender or a vertical player. And that allows us to feed that back into either consumer process improvement or flows back into our margin. Yashish mentioned, talked about the credit score platform. We have now 27.5 million or so consumers who have taken credit score from us. We are able to finally segment these customers and work with our partners, 60-plus partners to create preapproved programs, which are not available to any customer outside of the platform. And they come with better processes and better terms usually, that we are seeing scaling up fairly nicely. And finally, I think as we work towards creating new products, we are able to now utilize the digitization that's happening across the industry and is now allowed by the regulator. And that's starting to kind of create a much better, a) experience and b), hence, the funnel of the consumers who come on our platform.

The next question is from the line of Arjun Vikas.

Great set of results, Yashish, Alok and the team. I just wanted to check on the supplier side. Have we added any new partners? I know LIC was a new addition. But have you added, lost any new partners? And if you could talk about the supply side concentration, where you're like -- what were the largest partners share or top 5 partners share on the insurance side?

Yes. in, I can take that. Obviously, we don't want to talk about specific partners, but the concentration has not changed at all. The top 5 partners continue to remain -- they're not a very large. They are not overly dependent on anybody. So our overall concentration is quite -- is in pretty good shape, and it hasn't changed at all from year-to-year.

The next question is from the line of Nidhesh Jain.

Couple of questions, one is on renewal. I think it's a very critical piece to -- for the profitability of the company going forward. So can you share EBITDA margin on the renewal revenue?

Yes. On the -- so as I said, a bulk of the renewal revenue comes from Health. And the renewal rates are high. To give you some sense of it, they are on a blended basis somewhere around 87% or so. Every year, the premium also goes up a bit. So -- and it's based on the efforts that we put in over the last 14 years. And we get some revenue. So the effort on it also leads to certain cross-sell because we get a chance to interact with the consumer. And in that interaction, we have some other products that get added on or sometimes the premium gets increased, et cetera. But on the whole, I would say somewhere between 80% to 90% of it flows directly to the bottom line. And that's the reality here. And that number will obviously -- whatever business we have done last year, -- in the first year, the renewals are lower, from the second year onwards, they are higher. So we have -- we measure renewals as R1, R2 and then onwards. And every year, the renewal rate keeps going up. So from the business we've done last year, roughly 80% of it would renew this year. And then from the past business that we've done, broadly 88%, 89% of that would also renew. So on a blended basis, that's how the business runs. And there is no change, if anything, there is an improvement in renewal rates. And on the sort of -- yes, so that's basically the piece here. I don't know if you had any specific questions, but that's basically it. Yes. Also, I just wanted to clarify, we don't comment on any partner joining or leaving us. So if you notice, we never commented when LIC joined us. Yes, it did join and there was media, et cetera, but Policybazaar never went and commented that yes, a new partner has joined us.

The next question is from the line of Sachin Dixit.

Quickly on the off-line business, so I understand now that especially in case of Life and Health, when you are generating fleets online and you have an on-ground fleet that goes to a customer or visit the customer, if needed. Can you elaborate more on that how that works? Are there different sort of people who are getting onboarded? Are the previous partners [ all related ]? How is it working?

Yes. So Sachin, this business is totally separate from the POSP business. We have a team of people who -- there are a couple of different models. In some cases, the same person talks to the customers and goes there and meet the customer. In other cases, the person who speaks on the phone passes on that information to the colleague who then goes and meets the customer. All of these people who go to meet customers are full-time employees of Policybazaar. There's no outsourcing or no kind of other arrangement involved. We are building this team up. As Yashish spoke in his opening comments, this team is doing extremely well. We are very encouraged by the results that we are getting. And if you think about it from an economic perspective, the marketing spend remains the same, and we are able to derive greater revenue and EP from the same leads. So that's why we focus on the measure of premium per leads, and that number has been continuously going up. So that's what this whole thing is about.

The next question is from the line of Nidhesh Jain.

Yes. I'll give you guys a rough -- because there's a lot of you here, I will give you a rough -- don't -- of course, everything I say is official, but don't treat it like you -- treat it as whatever. I'll give you my thought process in this. Broadly, when we look at net present value, and we do this internally all the time, broadly when we look at net present value, about 20% of the net present value goes into marketing costs and about 20% goes into operating costs. Basically, what we are trying to do with our physical piece is take our net present value from INR 100 to INR 150 and our operating cost from INR 20 to INR 30. And what that means is -- when we do our net present value divided by our direct costs, we will receive a ratio of 3 rather than the 2.5 that we have today. Now of course, you don't see net present value because we don't disclose net present value. That's why I said -- that's how -- I think maybe if everybody allows, I will start presenting how we really think. We always think in terms of NPV divided by -- NPV of the transaction, not of what further that customer will do, but of that particular transaction and the direct costs related to that. According to me, we are at a ratio of 2.5 today. We're trying to move to a ratio of 3 and also increase from the same inquiry, our premium by about 50%. That's the basic theme. And according to me, if you really wanted to -- see what's the most critical thing in our business, actually, this is the elephant in the room, rest everything else is [indiscernible]. This is the real thing. And I think if we deliver this over the next 24 months, 12 months, 18 months, whatever, we actually become a very, very, very solid organization because this infrastructure is almost impossible to replicate, if you see what I mean.

We'll take the next question from Sahej Mittal at HDFC Securities. The question is on text. So I'll just read this. What is our policy conversion rate now for Health and Life business after coming with a supplementary of [ Claim ] model? What man hours go into selling 1 policy? Just to understand the scalability of the off-line business?

So our premium per inquiry has gone up already by about 20%, and this is across the entire base, right? Only about the 13%, 14% of sales are -- if you remember from the last quarterly meeting, I said by March, we will reach a situation where 10% of our high involved product sales will start happening through the physical model. That number, as of kind of the last few weeks would be about 13% or so. So that number continues to evolve. But if you wanted to do your cross calculation, you could do it out of that. We, of course, do all these intricate calculations on a regular basis and vintage of people, matters, et cetera, et cetera. We feel fairly confident of what I just explained in my previous conversation that we think both -- we actually see more productivity going up and premium per inquiry going up. Productivity, when we talk about productivity, we mean premium divided by cost of those concentrates, et cetera. So I -- but I think we might refrain from getting to that level of detail of you'll have some...

No, I just want to add one point that -- as we are doing this, this is getting better and better at it. Our conversion on our visits is extremely high. I mean, the conversion rate, when a person actually goes to meet somebody, is extraordinary. I mean, I don't want to go into those numbers. So I think the main thing that we are trying to drive is how many visits is the person doing, and what is the mix of online and visits, right? And that is the number that we are moving towards. And I think the fact that the visit conversion is so high, gives us a lot of confidence that we are on the right track, and that customers are appreciating this new way of doing business. New way for us, obviously, very old way from a customer perspective. So I think we are definitely headed in the right direction.

The next question is from a follow-up from Nidhesh Jain.

The two questions. One is, how should we think about ESOP policy going forward? The current ESOP that we have given, we have already set out the charge in P&L that we expect to see over the next few years. But how should we think about ESOP charge after third, fourth year? That is one. Second is on the PB Partners, since the majority of the take rate that we are getting, I think, will be passed on to the partner. So how from economics perspective, how should we think about that business?

So on the ESOP part see, we had a new grant, which was given to a team just before IPO. 80% of that has already been allocated, and the simple allocation is 5 years and 20%, but the way accounting works, as we explained last time was [ 45.67 ] has to go into the first year itself. Now since this was mid-year, half of that came in last financial year, half of that will come in this current financial year, FY '23. But overall the impact is going to be decreasing. Last year, impact, if you look at the numbers were INR 607 crores totally at a consol level. This will come down to about INR 540 crores, then INR 300 crores, then about INR 200 crores and then INR 100 crores in that order, roughly, roughly. But there are new ESOPs, which may be granted and that can change this number a little bit. People will see a fraction of this. Yes, fraction of this, first of all, certainly, ESOP obviously helps us retain the team and keep them motivated in the right manner, based on a cash charge for us. So we are very, very comfortable with this number, and our Board and investors were comfortable, and we had disclosed this in [indiscernible], to be honest, since IPO has been more than 6 months now, we've had almost 0 attrition in our management team. And yes, culture has got to do with it, but also ESOP somewhere keep the team motivated. So that's what we are in a very lucky position from that perspective.

Yes. But I would still see this as more of a one-off [indiscernible] than a continuous exercise. Simply because, yes, you came out of a particular phase, and we were going into being a public company. So this -- and this I'm sure, is the same across all companies. So any increases will be on an incremental basis. And also the compensations we are now paying are very market related. So we are -- in the past, historically, when we hired people, we used to hire people at a discount to market, which is quite rare, but we used to do that. But increasingly, that is not the case. So anyway, on your PB Partners, side, we will cover it, yes.

Yes. On the PB partners question, as I explained earlier, I just explained the levers to you. So the first lever is the fact that right now, our book is all new, right? So there is a cost of acquisition with a new book, which as you are trying to, I guess, say, sometimes that can even be higher than the pain that we get. As we go forward, there will be a retention book that will start emerging. And on the retention book, that dynamic will not be there. So I think that is the first thing that we had. The second thing is that in non-motor businesses, the retention is actually positive. And we are already the largest player in the non-motor POSP business as well. So it's not just that we have scale, we also have relevant scale. So in that case, as that book continues to grow, you will find that, again, economics will be more attractive. The third thing is that where does POSP fit in for overall story, right? POSP allows us to have scale against suppliers. And as we build up scale against suppliers, there will always be some advantages that will accrue to us from that. And as those advantages accrue again, those will help in increasing the profitability. So we see as we go forward this year, that the profitability will keep improving as we go ahead. And over time, we believe that PB Partners will also be a very large and valuable part of Policybazaar.

The next question is on text from Ranju Shukla. What are the levers of profitability for Policybazaar?

Sure. So see, our core business in the last quarter was EBITDA breakeven. It made about INR 10 crores of profit, as we have disclosed. It has broadly a 40% gross margin, right? So as it -- if you look at our core business, we were -- we are at about, give or take, about INR 400 crores of revenue -- right sorry -- just a minute. Give me a second, just getting to it. INR 1,200 crores of revenue, right, for the year, alright? About INR 400 crores for the quarter. That's what I meant. So about INR 1,200 crores for the year. So let's just make this up, right? Let's say like we've grown 45%. Let's say, we just grew 45% again. So if we grow 45%, again, and I'm not saying we are planning to grow 45%, I'll just say that if we grow the same, then that 45% is what? That's about -- that's roughly about INR 530 crores or so of additional growth. That 40% gives you roughly about -- about, it's INR 200-something crores -- INR 210 crores of additional contribution. Now please appreciate for any of that, we are not planning to expand our brand costs or other people costs, et cetera, anywhere near 40%, maybe a 10%, 15% increase. So let's say, our -- those costs are about INR 600 crores for last year, it might go up by INR 100 crores. So you've got INR 110 crore of additional EBITDA coming in, which, if that happens, should clearly make the core business profitable for the whole year, if you see where I'm going with this, right? As far as our new initiatives are concerned, see our -- as we explained, and that may or may not be the right way of thinking about it. But from a cash flow perspective, the way I am seeing it in my mind is we have somewhere a peg in our mind of the interest income. So on INR 5,000 crores, I don't know what our interest income is going to be. It is INR 200 crores, INR 250 crores. We will make sure that -- we will try and make sure that stays below that. And that's the intention. And the year after the existing business will grow again, hopefully, and then it will take care of things. So I think I've explained the leverage. Now coming to the basic levers. At a fundamental level, Paisabazaar and Policybazaar core business growing, the renewal book and the delta in margins coming because of the offline outreach are the 3 that I want to drive. And -- see, we have to be very careful as a public company when we were private, I wasn't so careful, I didn't have to give answer straight away. But we have a very clear idea of how much margin improvement we expect because of the physical leg. And that will not have an impact on today's revenue. That will have an impact on tomorrow's revenue. So that all gives us a lot of confidence here, but those are the levers. Again, to repeat renewal book, physical leg and basic organic growth of the core business.

The next question is from Nischint Chawathe from Kotak. Without any specific reference to the POSP strategy of Turtlemint or Policybazaar, a generic question. What does it take to succeed in POSP business? Is it agent grab or anything else? How do you penetrate deeper into the country? And besides brand, how does POSP leverage Policybazaar franchisee?

I'll give you a straight answer. Staying there. That's it. Whoever stays the course will win. It's that simple. Anybody can win. It's a straightforward business. It's a very straightforward business. You have to stay the course. And more importantly, you have to train your POSP to do more. See today, a bulk of what POSP do is Motor. You have to train them to do more Health, more Life, at some point, even more other financial products, credit cards, loans, why not? They are your legal entity POSP, that doesn't stop them from being the POSP of Paisabazaar. There is nothing stopping them from doing that. And those are our plans. At a very basic level, we're not planning anything rocket science. That's basically it. Can we train these people to do -- but Sarbvir, you, I think will have a more granular answer.

Yes. So again, obviously, Yashish covered the main point, but I'll just repeat again. First is growing the income potential of the POSP. So if you are earning INR 10,000 from selling insurance, how can I take you to INR 15,000. If you're earning INR 20,000, how can I take you to 30,000. And that implies having more products and training and et cetera, to help you sell those products. So that's the first part. Now to do that, you need to have a very robust technology and product platform. That's the second part, which, obviously, we have and we are continuing to improve that. The third part is the penetration beyond the top cities. That if you keep selling in the larger metro cities, obviously, it's very competitive, and those agents are extremely smart. You have to go beyond those cities, which again, we are doing, by building a whole organization out there. And I think that -- the success will [ beat ] to go beyond the Tier 1 cities and do that. And the final point, you must understand what is the difference between Policybazaar and others? Number one, Policybazaar is a brand. For an agent, it is very important to associate with platforms that are seen as winners and where they get respect. So people want to be with Policybazaar. When they go and talk to their customers, they can say, "I'm a Policybazaar agent. That's very different from any of the competition that we have. And the second thing is that we have the scale against our suppliers, because we are large partners to the suppliers because we give them a high-quality book of business, they are willing to give us opportunities and work with us on products, on propositions even in POSP. So I think in year 2 of our business, you will find us using these weapons more and more. And there will be a major difference between PB Partners and competition, along these lines, around brand, around products, around processes, service, just like we have on the retail side. Our retail business is very different from other online businesses. And in the same manner, PB Partners will also, over time, become very different from other POSP business.

See, Policybazaar was not the first entrant in the market. We were about the 20th player that came into doing what we do. There was obviously something that got us here. And part of that will kind of see us into the future also. Yes. Any other question?

The next question is from Pratiksha Agarwal. Set of questions. What do you plan to do with the INR 50 billion? And you mentioned some digitization initiatives. Can you please elaborate a few of them?

So the first one, I think, Alok, is the best person to answer. And the second one, I think Sarbvir and Naveen both can briefly answer on the digitization aspects.

See, on this INR 5,000 crores, this is a tricky one, to be honest. See, we are on a CapEx business. So whatever we do will be OpEx. It will look like a loss under P&L. So we will look at opportunities to invest in initiatives as Yashish has been mentioning. We are open to invest into [ how ] many growth opportunities as well. But typically, we have not found any decent opportunities to deploy that much money in our growth. We have typically looked at any specific tech services or teams that interest us, usually these will be quite early stage.

You have -- just to interrupt. You have just seen what's happened in the POSP business. Our combined loss for the entire year on that business might be $15 million. We are the market leader. You know what the valuations are out there. I'm not saying -- so we obviously can't find those valuations attractive to acquire.

Yes. So that's just on to I think -- for time being, no we didn't plan to deploy the INR 5,000 crores, but we remain open to look at all opportunities, whether it's inorganic or in-house growth. Again, we had mentioned that a lot of our initiatives will be getting funded just out of the interest income. So it's a tough one, we have got this money. And touchwood, we don't burn cash. We are EBITDA positive on the core business. So in times like -- this is a great thing to have.

If you don't have to worry about capital, that's a great thing to have -- a great position to have in a time like this. So I think the -- digitization, I think Sarbvir...

So just coming to insurance side, I think we are using advanced technologies across 3 parts. One is onboarding of customers. So we are asking fewer and fewer questions from customers. We are pulling up with their consent, their identity documents, their financial income, their medical history, et cetera. So we are working -- a lot of technology is being used to onboard customers. The second thing we are using is on risk and fraud control. So we are working with our partners to give more and more information about the customer that is coming in. In our presentation, we talked about how we look at authenticity of documents, how we do video verification, we compare the phase with the KYC documents they've submitted. We compare to voice signature with the voice that has spoken to us. This quarter, we have also introduced a liveliness check where we can actually check whether a person who's on video is real or somebody is holding a photo or using some other kind of impersonation device. So I think that's the second. The third is we have built a fraud graph for the first time in the industry, there is a payment graph, a fraud graph that has been built. You cannot enter our payment system with anything that has been used ever to do a fraud. So whether it was e-mail address, your permanent address, residential address, phone number, whichever way you try to come, we will be able to trace you if you have come before. And I think the third area that we're using advanced technology is in marketing and our efficiency of our own internal operations. So who should we target? What is the best product to suggest to this person? What is the next best product for this person? What range of items should be shown on the app, et cetera? So we are working on personalization, et cetera. So I think we are using technology to -- like I said, these 3 things: consumer onboarding, risk control as well as marketing and targeting of customers.

Naveen, you're second.

From a lending perspective, I think it's interesting because when COVID happened in 2020, the whole industry realized it was not as digital as it could be. And that's why the lending kind of came down drastically for the industry. Since then, of course, with the help of regulator, the entire industry is moving towards digitization. We have built our own digital stack. And I shared 2 examples in the deck that from the customer coming in to the customer being identified on whether he or she can get an offer from a particular partner. The KYC happening through various means, whether it's CKYC, eKYC, oKYC or video KYC, to underwriting happening digitally to the repayment confirmation through [ eNAT ], et cetera, happening? And finally, the e-contracting through digital agreements, that's all happening digital now. The couple of examples I've shared. For example, if a customer today is preapproved customer with Axis Bank. They come to our platform, we've kind of deeply integrated with them. It's a beautiful journey. The customer comes, gets identified or preapproved and gets out within seconds or minutes with loan amount in his or her bank account. The second example that I've shared is the co-created products that we are working on, a step-up card that we have. Customer comes in and within 2 minutes or so, the customer has opened an FD with a partner bank, got a credit line against that. The virtual card has been issued and the customer can actually start using the card digitally. Any next question, please?

So there's a question on the line from Hiten Jain.

I have one question. So this other expenses that we report, which grew 100%, INR 137 crores in this year FY '22 versus INR 65 crores last year. So this expense, given that it has grown so much, it should be linked to revenues. And I wonder why would you classify this under contribution EBITDA? And even if I look at the breakup, I think around half of it is payment gateway charges, shouldn't that be directly linked to revenues and be part of direct cost?

So see, the first, Hiten, is direct cost -- typically are the direct operating cost and the acquisition cost. And this is the way industry has been taking it. But yes, I take your point. Technically, this should also be part of the cost above contributed margin, but somehow, the classic reason than we have seen across the industry is a little different, and we have [ gone ] to the same classic reason so that there is no confusion when analysts or investors are looking at our numbers.

Okay. So at 4:00, that was the last question for this call. I'll just hand this back to the management at Policybazaar for their closing remarks, and then we can close this.

Thank you very much. Thank you for those questions. I know it was a Saturday afternoon. Next time, we will try to do this on a weekday, so that -- but very grateful for all your participation and all your questions. I think as a concluding remark, all I would say is, look, this is a prudent management, of course, definition of prudent can vary all the way because of a huge spectrum of prudence. We are also a growth company. We are -- nothing about us is going to change from how we have been in the last 14 years. We have been a certain type of organization. We have had a certain amount of burn. We've grown at a certain rate. We've done initiatives in a certain way. We've done acquisitions in a certain way. Just because we have more capital or just because we have less capital, whatever, our philosophy towards business, the kind of people we are, is not going to change. And so whenever you think about speculating about what all could happen, one of the best ways is just look at the history of this organization over the last 14 years because we cannot change our DNA nor will we. And I think I genuinely believe that the existing business, which -- from an EBITDA perspective, from an adjusted EBITDA perspective, brokeeven last quarter, should now stay in the positive zone. And as I said, as it grows with its margins, it should add further and further to profitability. Policybazaar is decidedly profitable now with the insurance business -- in Policybazaar, the insurance business with about INR 20 crores -- INR 28 crores of EBITDA last quarter. Paisabazaar is fast catching up. I'm fairly confident that soon we should be -- when I say soon, I mean, at some point, not so much near in the future, We should be able to announce that Paisabazaar has also brokeneven, and that's also profitable. And one by one, each of our initiatives will move in the same direction. I don't know in what order, whether Dubai comes first or POSP comes first. I think the Dubai will come first before POSP, but let's see. And we intend to stay absolutely focused on all 3 of these, and do a good job out of them. And at any stage, we feel -- we'd love to have your feedback all along. But thank you very much for joining, and have a great rest of the weekend. Bye now.

Thank you team Policybazaar. Thank you, everyone, for joining, and have a great weekend. This is Vijit. Thank you.