PB Fintech Limited (POLICYBZR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the PB Fintech Limited Q1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rasleen Kaur. Thank you, and over to you, ma'am.

Thank you for joining us today. We have with us Mr. Yashish Dahiya, Chairman and CEO, PB Fintech; Mr. Alok Bansal, Executive Vice Chairman and Whole-Time Director of PB Fintech; Mr. Sarbvir Singh, President, Policybazaar; Mr. Naveen Kukreja, CEO, Paisabazaar; Mr. Mandeep Mehta, CFO, PB Fintech. Now I request Mr. Yashish Dahiya to give us a brief update about the quarter 1 FY '23 results.

Hello, everyone. Before I give you the details on the way forward and the Q1 FY '23 performance metrics, I'd like to reiterate some facts about our business. There are 4 pillars that I believe we stand on. Firstly, a majority of health and life insurance consumers in India today research on Policybazaar. This leads to a higher persistency for these consumers because having done their research, they somewhat know what they are purchasing and then the likelihood of churn is much lower. We have the best conversion engine for digital inquiry, and continue to improve it as demonstrated by the increased premium for inquiry of 32% over the last 12 months. And the third [indiscernible], we continue to improve the platform in terms of the consumer onboarding, service and capability demonstrated by the feedback, which is [ 83% ] and the numerous amount number of unprompted customer messages I receive every day on claims support as well as customers onboarding. And lastly, but not the least, a higher customer disclosure, which is because the customer is filling out the forms themselves, along with stronger data analytics and broad detection mechanism, which leads to a better control for the claim ratio, which eventually also lead to higher claim settlement rates. We continue to build on all 4 of these pillars and we get stronger every day. Our core businesses, the insurance marketplace Policybazaar and the credit marketplace Paisabazaar, grew at 59% year-on-year. And have now been adjusted EBITDA positive for the second quarter earnings. Under the total revenue, the credit linked revenue was INR 84 crores for the last quarter. For our insurance business, we had an adjusted EBITDA of INR 18 crores positive for the last quarter. For our complicated products like health and life insurance, we have been extending our customer connect beyond remote calling by giving consumers the convenience to have physical meetings at their home or office and in their local language. We are happy that customers have accepted this wholeheartedly and the results continue to encourage. We have also extended on-ground claims support in 114 cities as of date. Our renewal revenue is now at INR 270 crores annual run rate. And as we have previously mentioned, roughly 85% of this flows directly to the bottom line. Paisabazaar, our credit marketplace continues to grow very well and has rebounded strongly from COVID. We are now at an annual run rate of INR 11,200 crores disbursal and 4.3 lakh credit cards issued. We have over 1.5 million customers who access the credit score platform in 823 towns. This number represents 13% of India's credit score -- active credit score consumers. 75% of the consumers are from non-metros. With increasing digitization, the digital marketplace like ours, obviously stands to benefit. Co-created product strategy is shaping up well with step-up cards and credit cards, et cetera. Our contribution to margins have improved significantly over the last 2 years. And I'm quite pleased to say at this stage, we expect the credit business to turn adjusted EBITDA positive by Q4 this year. To update on new initiatives, PB partners, our seller aggregator platform leads to market in scale has the highest proportion of non-motor business and has started increasing efficiency. We continue to be positive on all the other new initiatives as well. Essentially, we have delivered 2 quarters of positive adjusted EBITDA on our core business now. And now onwards, the core business in our best opinion, should continue to grow EBITDA by roughly INR 150 crores every year, every passing year. We are very comfortable supporting new initiatives at roughly a INR 200 crores earlier burn as of the present month. Q4 -- just the seasonality, Q4 is usually the strongest quarter in our industry, and Q1 is the weakest. However, our core revenues are roughly the same in both these quarters, if you notice, Q1 revenues are 96% of Q4. Last year Q1 was a COVID year, and health and life insurance demand in terms of inquiries had peaked. The inquiry in the month of April and May this year were not at the same level as last year. However, we will still work to continue to grow, largely owing to higher premium per employee, which we achieved due to our operations. Inquiry growth has returned in the last few months, and we are confident of higher growth in the coming months and quarters. We are a significant and growing contributor to the fresh retail term and health business. And in fact, even to the savings business now for our country. And have delivered 2 quarters of positive adjusted EBITDA in our core business. And we feel we could be adjusted EBITDA positive as a group by Q4 of this year for the entire business. It is close enough, and we have confidence enough. I'm happy to take questions now.

[Operator Instructions] Our first question is from the line of Sachin from Bank of America.

I have a few questions. First question, Yashish, I would like to actually understand how is the mix for your business change as we are recovering away from COVID in terms of health, motor, life? Any specific changes we are seeing out there? And a related question is, hopefully, your business is not too impacted, but any impact on the back of inflation are we seeing?

On the back of?

Inflation.

So I think both the questions are for Sarbvir...

Yes. So Sachin, on the first part, we are seeing -- just by the base effect, we have seen a stronger growth in motor in Q1 than other businesses just because last year was very low. But otherwise, as Yashish mentioned, health in terms, we were able to build despite the drop in inquiries from last year. So we're not seeing any major change in the mix of our business in the first quarter. The impact of inflation is also fairly subdued on our business so far. I think there is some general impact on the economy, but for our business, it's been clearly subdued.

Got it. Second question is you guys mentioned on being close to adjusted EBITDA breakeven by 4Q. Any thoughts on how do you guys look at the steady state sustainable EBITDA margin? And how soon should be able to reach that after being close to EBITDA break here?

So I think we've -- we've given a very clear indication now that -- and that was really aimed at the analyst community that we believe we should be increasing our profitability by INR 150 crores every year from here almost every passing year. So that should give you a pretty good steer on where -- and I don't see that slowing down for the next 3, 4 years at least. So that should give you a pretty clear steer on where we believe the profitability could reach over the next 4, 5 years. Yes, hit 1 breakeven by Q4. But Alok, is there anything specific you want to add to?

No, Sachin, see, if you look at the core business, it has been profitable for last 2 quarters now, and that will continue to build. And as we get to the year-end, that number should be big enough to cause other experiment that we do. We would definitely want to invest in the experiments to the extent we feel comfortable and that number is already given at about INR 200 crores. But the way of our core business continues to deliver efficiency. I think over the next few years starting from next financial year itself will continue to be at EBITDA being positive. In fact, the [indiscernible] also will come down quite substantially because of the way of counting [indiscernible]. So from 2024-'25, I think [indiscernible] that will be quite miniscule compared to the sort of EBITDA we grew. So I think...

It's the EBITDA, which we'll be talking more, definitely about that time.

Got it. And my last question, Alok, is just a follow-up on the experiments you mentioned. Clearly, I mean while you guys have given a guidance of INR 200 crores, the kind of investments we have made look a bit conservative as compared to INR 200 crores. So is there a general thought process that if you're not able to invest that, that could be a return back to shareholders? Or how do you look at that?

[indiscernible] 3 investments, Sachin, we are not talking about investments in third-party acquisitions. We're talking about investments into our experiments, which are the seller aggregation platform, the [indiscernible] platform that we are PB partner, the corporate business that we are building and the international business through the UAE entity that we have got. So these are the investments that we were mentioning about INR 200 crores. We remain truly in terms of our investment into any inorganic growth opportunities. We will only get that we feel that they have potential or some synergies with either Policybazaar or Paisabazaar platforms. But generally, we have been more billed versus acquired. And I don't think that it is going to change in our...

We'll take our next question from the line of Nikhil Agrawal from VT Capital.

Sir, it is to the new initiatives and the investments that you mentioned. So given that we started this digital model and we started to begin a digital presence in the form of stores and we have the target also of establishing more than 200 stores by FY '24. Why do we see a reduction in the expenditure in the new initiatives as of this quarter?

Okay. So first of all, all our physical stores or physical presence are not part of our new initiatives. I think we have clarified this many times. They are part of our core business. And so all those costs are in the core business, all those margins are in the core business. And when we say the core business is profitable, that -- or adjusted EBITDA at the adjusted EBITDA level that implies -- it includes all those parts of all those stores and all those physical people and everything is included in that.

So the -- expenditure on the core business is down from last quarter?

The expenditure on the core business is -- just give me a second.

The expenditure is just a function of the revenue, right? So if the revenue is down a little bit compared to last quarter because of the seasonal nature of the business. Expenditure follows that. There's no other thing, right?

All right, sir. Sir, if you could -- yes, sir, please go ahead.

It was the same as last quarter. There isn't a major change. It's very much the same as last quarter. And we, we don't give separate breakout in terms of the expenditure then on the FOS or the physical store side that we do. That is a still a very nascent part of the core business is growing, and we are taking very major costs for each location and in store. As these grow and we keep on investing more and more on these. Typically, any particular store requires a small investment from CapEx perspective. And then there is more investment on the OpEx perspective first few months. Within those 3 months or 6 months [indiscernible], people start to actually -- breakeven within the store or within that location and start to contribute back. So we have been expanding slowly, slowly over last year...

Just to explain, there's no confusion on this. Our core or existing business revenue last quarter was INR 386 crores and that is INR 371 crores. Q4 is the biggest quarter, and the contribution has gone from INR 179 crores to INR 157 crores. So -- and actually, the EBITDA is down by about INR 5 crores. So while the revenue has declined by roughly INR 15 crores, the EBITDA was down by INR 5 crores. That means the expenses have gone up by -- has gone down by about INR 10 crores, which is okay. At that level, it is a 3%, 4% shift here or there. So that has got nothing to do with -- there is no -- it's pretty much the same as it was. There isn't much change.

All right, sir. So if you could give me the renewal revenue for this quarter.

The renewal revenue is at INR 270 crores run rate. So annual rate is INR 270 crores, which is divided by 4 -- that's INR 67.5 crores.

Yes, sir. Sir, what part of our premium would be life and health premium as a today since health is the major focus as that end is the most renewal on for us? What part of the total premium would be life and health as of today?

Approximately 75% of our premium is life and health.

All right. Sir, going forward, sir, this is the last question for me. Going forward in the [ POIC ] business, so as we've been doing this, the third-party agents are come on a platform and sell our insurance products and we forego a major part of the fee to them. So going forward, how much of that is going to be given to the third-party agents? Are we changing that in the coming quarters? Or is it the same model as of now?

So I think the answer to that question varies by category and by subcategory even. And as you can imagine, it's a competitive market, so I can't share exact details with you, but what we are trying to do is to improve the retention as we go along as the loyalty of our agents build. So the way this works is that agents care about cash flow. They care that who pays them on time and who pay them reliably. As that -- even now we've established that over the last 4 quarters, that we are a big player in the market. We are paying on time. Our technology now is the best in the market. So people like to work with us. So as that happens, we will be able to retain more as we go along. And you will see the impact of that as the quarter develops.

All right. Sir, any target for physical presence for this year?

Any target for?

Physical presence for this year in the form of stores?

Yes. Right now, so stores are a small part of our overall presence. Just to give you a sense, we have over 600 people deployed in the field. We have 40 stores only. So stores are a small portion of the overall story. We expect that as the economics prove themselves out, continue to expand both the number of people in the field as well as the number of stores.

All right. Sir, just one last question. How much are we finding on the customer grievance, that is the call center service and other people that are taking up the call and addressing those grievance of the customers? How much are we spending on those?

We have about -- I remember as of last few months, there are about 300 people who are answering customer queries and grievance. So yes, we, of course, spend on that, but that cost is included in our -- within our margins in our core business.

And does it form on major portion of the employee expenses?

No, it's not a major portion. It's not a major portion. No.

We will take the next question from the line of Sachin Dixit from JM Financial.

Congratulations on great quarter. My first question was regards to the life insurance sector, right? Today itself, the new [indiscernible] become a very prominent post with almost [ 50% to 55% ] of market share and [indiscernible] onboarded [indiscernible] last 5, 6 months. Are you driving benefits in the partnership now? Or is it still work in process?

Yes. So I'll just take that. LIC on online journey started just last month with us after all the integrations have been completed. The first month, as you can imagine, has been a good start. We are slowly building the business. But we are very optimistic, and I think we see a very good opportunity ahead. As you said, LIC is a major player in the business, and I think we will also benefit from that as we go along.

But so far not this traction.

I said the traction is very good. We've just started.

Okay. Okay. Sure. My second question is with regards to if you can provide you some sort of mix between new business premium, renewal and B2B or that you're speaking and basically -- because obviously, new initiatives are almost 25% of our revenue today, and we do not have much numbers. So it would be helpful to get number.

I think in the press release, we have given a breakup of our core business as well as not -- we have not -- we have done that?

We just have revenue and investment alone, that's it.

Just a second. I don't think we are doing those breakups, yes. We don't do those breakups, historically. We are not doing those breakups. Sorry about that.

Yes, I understand. It's just like it's become a significant part of the revenue today, right? It's not -- would be helpful going forward, at least we can...

The revenues are mentioned. So I think we only do policy versus paisa. We don't go into a segment-wise breakup within the company. We just don't do it for various reasons. I understand that there is a requirement for it from -- or a desire to have that, but we don't provide it.

Right. Because without any drivers, we do not have a number of POCs. We do not have a premium, right, it's very tough for us to drive the model like this is just a number or a cycle.

We appreciate that.

I think, Rasleen can help you with some guidance later to like...

We'll take our next question from the line of Arjun Vikas from Alfa Wave Global.

First one, great results are looking at us. Quick question, on credit card, I understand you are going to launch co-branded cards or come out with some card offering of your own. Does that get impacted in any shape and form in the recent PPI in regulation with banks loading of those cards with credit?

I think, thanks, [ Navin ]. The PPI regulation was impacting the prepaid instrument. When we talked about the cards, we're doing -- we have 2 co-branded credit cards driving the market. So they do not get impacted because they're not a credit card platform, not on the PPI platform. And they satisfy the co-branding conditions that RBI has laid out when they came out with the regulation on what is allowed and what is not allowed for a co-brand partner to be doing. We work with -- in both the cases, we work with different but banks, so the banks are -- we're working with them as per the regulation.

So no impact in our plans going forward either...

Absolutely, no impact.

Okay. Great. Good to hear. And on -- I was seeing the slide on the claim settlement ratio which said that we're probably 8 percentage points higher than the industry. Just wanted like what are we doing here, which is sort of different, because just the underwriting which were driving this in some shape and form because there's lesser frauds involved at the time of underwriting? Or is it actually something that being at the time which is helping this incremental percentage?

So on the claim settlement ratio that was from example, from health insurance. So the reason that is happening is that because we have higher disclosure upfront. So the main reasons why claims tend to get rejected is because there was a lack of disclosure. So person is not told that there is certain preexisting illness or something which the insurer uses has to reject for that reason. So because we have such high disclosure, our customers, when they came, their policies tend to be very clean. And secondly, our customers also understand their policy is much better than probably average. So there's the whole process, both in terms of their make relevant claims and the fact that they are -- they have disclosed everything tends to do that. On top of this, we've spoken about the claims support that we are providing. So we have a physical presence in 114 cities now. Our person shows up at the hospital, if required. We have call center of support as well. So when the person has to file a claim, we guide them in terms of what is -- what documents are required, what all is needed. So that also helps in ensuring a high claim settlement ratio.

Got it. And sir, just last question. Would you be able to share any kind of guidance or numbers around customer acquisition costs and kind of premium we do per agent on the call center now? Or has it Changed significantly...

Sorry, you want to -- I think Sarbvir should answer that, sorry.

I think it's really hard to talk publicly about these sensitive numbers. But I would just say that, as you can imagine, the premium for inquiry is building, right? I think that number has been shared at over INR 1,500 per inquiry. So I think as that builds, you can imagine that the productivity of our agents is only improving as we go forward. And again, just to remind everyone, the reason our agents are productive is the fact that the person when we come to Policybazaar, they are at higher intention of buying insurance. So this is the only platform in the insurance, we got this direct, someone comes to buy insurance versus being sold insurance. So that is step one for the reason why our productivity is high. And then, of course, our agents are very well trained. They have great support from a technology perspective, from a CRM perspective and everything. So it's really 2 things put together. The fact that a person comes with higher intention of buying insurance and secondly, because we have very well trained and very capable agents. These numbers are only building as we go along.

If you look at our overall health and life business per se -- as I said, the last number, that number is about INR 10 lakh per agent -- at a broad number for a salesperson that's about INR 10 lakh per month. Typically, an agent in the market would be quite happy if they are selling about INR 50,000. So about 20x the productivity of what you would call a standard offline agent. And as Sarbvir mentioned, that is largely driven by the fact that there is a desire on the part of the consumer to buy, which is what we expressed by at least voluntarily coming to site to research that particular product and the technology platform, which allows for better onboarding issuance, et cetera.

We'll take our next question from the line of Nischint Chawathe from Kotak Securities.

Two questions from my side. One is the new premium per inquiry. This has gone up by around 15% on a quarter-on-quarter basis. So how should we really think of it? You mentioned that for obvious reasons, motor premium was higher in this quarter. So -- and I would believe that motor premiums would be maybe in line or maybe slightly below your average medium. So how should we really -- how should we really think about it? Is it something that you were able to grow savings at a faster pace? Or is it something that you've seen a very similar increase in ticket size across products?

So first of all, Motor is a very small portion of that answer. I think the real answer is that as we just discussed, the productivity of our agents is going up. So they are able to convert more lead per agent than they were converting earlier. This is driven by 2 things: intent of the customer, the technology that we are providing our agents to talk as well as the onboarding, et cetera. And the third thing is the off-line component that we have added where a person is able to visit the customer in their home or office as their desire, and that is giving us an incremental productivity and incremental conversion. So when you put these 3 things together, that is what you are seeing in that average premium per inquiry, which is being driven upward.

So just to kind of add to Sarbvir's answer there, although I've been given very clear instructions not to interject in Sarbvir's answers, because he handles Policybazaar -- and should not, but I'd still say something. If you look at the last 14 years of our existence, we have been putting in the efforts on technology and product and the customer and are training all along. But never in history have we seen a premium per inquiry go up rate that it has gone up in the last 12 months. And the primary reason for that is the fact that we have started the physical channel. That is the biggest reason why this premium per inquiry is going up. Although that alone will not explain it because only about 15% of the premium has started going through that channel. So that did not explain 32% increase. But that will increase -- that will probably be the biggest differentiator over the last few years.

And basically, the offline format is obviously doing larger ticket...

There is no doubt the off-line format is more productive.

So basically, 15% when you say, these are 15% off-line inquiries, I mean 15% of the inquiries are offline...

Single off-line inquiry. I just wanted to clarify, we don't have a an off-line inquiries. All inquiries come online. They can be closed on the website without assistance, which is what happens to almost all motor, 2-wheeler and travel business. For health and life, a bulk of the business used to get closed by the call center through a voice call or a video call. And now increasingly, customers also have the ability to meet with our agents in their office or their home. And that last leg is contributing to about 15% of the business. And that is where some of the growth in productivity, et cetera, is coming from. And that 15% has been growing every month for the last 12 months.

15% is a significant part to start going through a new channel. Nischint see, mix change in all will keep on happening. Some of these are convertible, some of these are not convertible. But if you look at -- if we were converting at x percentage earlier, are we doing a better some of it? Yes, because we're taking -- because of [indiscernible] integrations and all. So the effort required per transaction is down, and it's coming down every quarter. The second part is, are we going to add something to the x? Is it becoming x plus delta. But that was the online -- sorry, offline, physical part is also helping. So for the same inquiry -- say for the same 100 inquiries, we're able to convert more and convert faster. And that is an effort which we'll continue, specify on the physical side, it's a very young experiment still. And we understand more and we learn more, I think we continue to hopefully deliver more and more bigger for inquiry from that perspective.

Got it. The second question is on the EBITDA line. If I'm looking at Slide #4, what you're saying is that Q1 FY '23 adjusted EBITDA non-GAAP is negative INR 66 crores number. And if you're specifically what you're guiding is that the INR 66 crores will come closer to 0 by the fourth quarter. Is that a right reading?

That's the right reading. Absolutely.

Sure. Sure. And the new initiatives, which I believe largely is the PoSP business is currently you have expensed around INR 71 crores this quarter. And you mentioned that you are okay to spend approximately INR 200 crores per year. So I mean, in that sense, your existing business will have to kind of match up to get into a negative or near 0 number? Is that the right reading?

Yes, yes. So the existing business will more than cover that cost by the Q4. We are fairly confident of that.

Nischint, there are 3 parts of [indiscernible] here as we look at it. But it is what we are doing on the insurance side, which continues to be EBITDA positive and it continues to become stronger and stronger over the quarters. The second is what is happening on the trade side, where the EBITDA loss has come down. And as Yashish mentioned earlier, by the end of this year to be breakeven. And third is the experiment, which you can already see from last quarter this quarter, the number has come down in terms of the investment that we have done on those experiments. But our endeavor is to keep it around INR 200 crores the year, for the first quarter to obviously, you can see that the number has come down to INR 70 crores from INR 90 crores. But for the year, we are quite hopeful that we'll be in to INR 200 crores. So by the time you get in to quarter 4, all these things put together should hopefully driven into a adjusted EBITDA neutral or positive quarter for us.

Should that clarifies. Just one request, if in 1 or 2 quarters to underline, if you can start sort of splitting the existing business into the credit and the insurance business, I think that will just help us to read the numbers or the underlying trends better.

So we take that for Nischint and come back to it.

Next question is from the line of Arpit Shah from Stallion Asset.

Yes, I have a couple of questions. I just wanted to understand what was your quarterly revenue share, like let's say, how the first quarter would look like and how the fourth quarter would look like because we are a seasonal business and Q4 is typically a heavy quarter for the insurance industry? So how would Q1, Q2, Q3 and Q4 would look like in terms of as a percentage of that...

Historically, the -- see, we don't give forward guidance and all that, except for the one I'm giving for Q4. I'm giving some forward guidance because I think everybody and we also feel fairly confident of it now. But historically, the year has been about 5.5x of the first quarter, but seasonality is reducing for us. So you can make your own judgment call on how it would play out. Yes, it varies by its vertical also. So as such typically what happens is it you look at industry because industry is skewed towards savings product, that's where you see much higher seasonality for the industry. In our case, because we have very good product protection, which is not as seasonal, the number is not as skewed also. And the number I think coming down for us. In fact, a few years at the number you see was quite big. But now I think as [indiscernible] this number -- a couple of years would have been 5 to 5.5. And if you look at last year, we did what, [ INR 400 ] crores at the end. And this quarter was what -- INR 238 crores -- INR 240 crores, so that's a little more than -- And -- but we had a lot of growth of new initiatives in the latter part of the year. So there are 2 parts there, right? Last year, actually, Q1 was quite a strong quarter because of COVID compared to the rest of the year. But at the same time, we had a lot of new initiative growth. So my view is, as a fair assessment, I think, yes, that's at the number there. Historically about 5 to 5.5x. I don't think that will be the case this year. I think it will be on the lower end of that spectrum at best...

Got it. Got it. So around Q1 into [ 5 ] is the typical revenue that [indiscernible] for the volume?

See, yes, we do have plans. We don't share them. If it's update you want to [indiscernible] total number be 5 to 5.5x.

Got it. Got it. Sir, the ESOP cost is quarter around INR 170 crores, would that be the right number?

Yes, something around INR 160 crores.

INR 157 crores.

INR 157 crores. Okay. And I just wanted a clarity on the INR 150 crore adjusted EBITDA you were referring to an increase every year. So what is that number exactly? Like INR 150 crore could keep happening every year or -- how is it -- is it on adjusted EBITDA...

INR 150 crores every year. That's our assessment.

On adjusted EBITDA or normal EBITDA?

At the adjusted EBITDA level. So if we do x adjusted EBITDA in a particular year, the next year, it should be about INR 150 more than that.

So this year, you're expecting it to be 0 and probably of FY '24, we would move to INR 150 crores?

The year won't be 0, the last quarter would be 0.

Okay. And as LIC is come into our -- as a partner, wouldn't your addressable opportunity go higher by like, let's say, 3 or 4x because they are like 70% of -- 70% of the market in the life insurance.

It doesn't work quite like that, as you can imagine. I wouldn't want to go into what our opportunity could be. But you're right, it's a very big opportunity. There are obviously a very strong distribution already. So I wouldn't say that there is 4x opportunity, but it's a big opportunity. And our focus always is to make the most of it and see where we end up, yes.

Got it. And just in the new initiatives, what would be our fixed...

If you want to think about this, think about it in a very simple manner. It like a restaurant where a certain number of customers come and it has a certain set of dishes and certainly the most popular dish also becomes available. I don't think the restaurant -- it will be hard to say that the restaurant sales would become 4x just because the most popular dish become available, the same set of customers coming, right? So yes, the restaurant revenues might go up some bit. But I think that's the way to look at it. It's like there is a fixed number of people who are coming to us. I doubt if our conversion rates will quadruple. But yes, we expect some improvement, and that's obviously...

Got it. And just wanted to understand the fixed overhead in the new initiative business, right now you're going to be burning close to INR 1 crore, but what would be that fixed cost overhead line item sitting there? And at what scale line item would stop growing actually?

Sorry, on the new initiatives?

Yes, on the new initiatives.

Yes. So I think we've peaked out on that. It wouldn't require a lot more from here onwards. I think I don't have a view on it increasing any further -- we [ peaked ] out one. As I had explained last quarter that we had peaked on overall losses. And this year, I couldn't say this quarter, I can say we peaked out on the...

No, I just want to add that if you see Q3, Q4 and Q1 of this year, each quarter, the investment in the new initiatives has come down. So I think it's slowly -- to your point, it's really -- we are moving to find where the fixed cost to start getting covered. And as Yashish said by Q4, we would likely be breakeven for the whole business.

So direct costs in that business is around INR 200 crores every quarter, right?

So direct cost INR 200 crores?

INR 134 crores plus INR 54 crores.

For the all new initiatives taken into. Correct.

For all the initiatives put together, yes, roughly about INR 200 crores, much about INR 180, INR 190 crores. INR 180 crores, INR 190 crores.

So once we see the new business revenue is crossing to INR 100 crores broadly. That is when we become contribution...

So these are not fixed cost. These are direct costs. See, before we get in that details, just, let's take a step back and understand a bit about our business. There are 3 things: scale, growth and profitability. And scale and growth are the -- they are very linked to each other, but both have differed calibrations for us in terms of how -- what from support we get from suppliers, a lot of input we get from the investor community and everyone else. Now, new initiatives are very important because these are opportunities out there where we want to invest. I don't know whether we mentioned this, but we have more than INR 500 crores on the balance sheet as of June end. And it will be quite -- it's super important to management team not to figure out what are the right opportunities to invest and look for the future growth, next 3 years, 5 years growth in years. So in new initiatives, bulk of it is direct cost. And direct cost will obviously grow as the revenue grows, but we will try to become more and more efficient. So if you look at our contribution percentage on new initiative, it used to be 52% negative last quarter, which has come down 40% negative. Now our hope is we'll continue to drive this downwards. So that in some time, whether it is 1 year, 2 years, 3 years, but in some time, we are able to get to 0% the number here. But we all believe that this is the right way for the business to look at growth over the next 5 years or 7 years timeframe. So we will continue to invest. And the number that Yashish mentioned earlier and that we're trading that will be about INR 200 crores for the year that we are willing to invest as of now. If it changes and COVID come back [indiscernible].

Our next question is from the line of Dipanjan Ghosh from Citi.

So first is a data-keeping question. If you can split your premiums on the insurance business between new and renewal. The second, in a more from a quality perspective, if I just do some numbers on your contribution margins, what it looks like is that the entire benefit has come from the old or rather the digital insurance business, where the contribution margins are probably now 60% plus. And to some extent, that looks like that is probably driven by significantly -- in a significant reduction in your ad and promotional spend that goes into the contribution, even though the share of customers coming directly and some of these factors and the mix has probably remained constant. So if you can give some color on that. And third, I think more from the premium mix side, it looks that the Y-o-Y growth in premium through your digital channels has been in high double digits or maybe a little bit more than that. So is it because of slowdown in term? Or is there something to read into it? That's all.

You want to take this?

Yes, sure. No. So the first question, Dipanjan is that our ad spend is driven by the business and everything that we are doing in each month. So there is no such thing that we have slowed down or speeded up the process. Last year was a COVID year. So April, May were a very strong month because of COVID. So obviously, we were very visible and active on television. This quarter is a more normal quarter and we spent as we would in any first quarter of the year.

Overall, [indiscernible] -- so I think if you're away, you could take this offline with Rasleen that would be helpful because our brand spend or our ad spend has not really come down. If anything, it's higher [indiscernible] So I would just take it off-line, that would probably be more helpful.

Sure, I will do that. And if you can give the split between renewal and new business premium, for the quarter?

So of the total premium, new business is INR 1,390 crores and renewal is INR 1,040 crores.

Okay, sure. And lastly, the origination of the premiums, it looks like the origination for the digital channel has been a bit soft. Is my understanding correct? And if you can elaborate on the probable reasons for that.

No. I think what you're attributing to is, again, because in term and health last year and the protection business last year was a very strong quarter. First quarter was very unusually strong because of COVID. So there is some difference because of that. So that has obviously happened this quarter. But other than that, I think if you see the results, especially on the revenue side, the growth is really strong.

As we look at Q4 versus Q1, we are pretty flat on our premium. So there isn't any slowdown, et cetera, through the same this year from that perspective. Of course, last year was an exceptional year. So you cannot really take the demand for last year because obviously, during COVID everybody needed health and life a lot more than they would in a non-COVID year. But -- yes, Q4 to Q3, we're very good.

Our next question is from the line of Dhaval from DSP.

A couple of questions. First is relating to -- could you just give the revenue for Paisabazaar for the quarter?

The credit -- so the credit revenue is INR 84 crores for the quarter.

Okay. And the distribution would be like the credit card, et cetera, would be?

Yes, we don't get into those details. We don't go into segment by segment, but the leading product out there is unsecured loans and credit cards, and they are both doing well. But we will not give more disclosure than that. We just don't do product level reporting.

But what we have given, Dhaval, is the disbursal growth and credit card growth. Disbursal grew by about 135% Y-o-Y, and number of credit cards issued grew by about 600-plus percent Y-o-Y...

Sure. And what would be the equivalent number for last quarter, the INR 84 crores equivalent number for last quarter would be approximately?

Our revenue Q-on-Q grew by about 8%.

Okay. Got it. And the second question, just to get it clear, is -- I mean it seems assuming the adjusted EBITDA is 0 in the fourth quarter. Basically, we are saying that the adjusted EBITDA next year would be 0. And our ESOP cost, which probably this year, we -- I mean, given the trajectory could end about INR 600-odd crores, that will also phase out in the next year. So somewhere in FY '25 or so, we expect sort of EBITDA breakeven or close to EBITDA breakeven. Is that understanding correct?

Let's see. Let's see, is all I would say. Let's see. So your understanding is correct, but your and my understanding might be different is all I'm saying. So let's wait and watch.

Okay. And where would the difference be? I mean, what is the...

Looking at the past numbers and looking at what all you know, your understanding is correct.

Okay. Okay. Got it. And just to confirm the ESOP cost for the year, we expect it to be around INR 600 crores for the year?

INR 544 crores -- Yes, a little bit lower. I think it is more than INR 550 crores. A bulk of ESOP that you see here located in last October. So the [indiscernible] between 2 financial years. So the last 2 quarters of the last financial year, 2 quarters of this financial year that has come [indiscernible] a little bit again, for 2 quarters this year and 2 quarters next year. So we'll continue to see it coming down for the next 5 years. But the number for this year is about INR 540 crores, INR 550 crores.

See, this year is -- just to give everybody clarity on this, just make a note of it so you guys are all clear. This year, it's about INR 550 crores. Next year, it's about INR 300 crores. The year after, it's about INR 189 crores. The year after, it's less than INR 100 crores, the year after, it's about INR 30 crores for the year.

And that's FY '25...

So FY '24 -- the year '24, '25, it's about INR 180 crores, INR 190 crores. That from all the information we know at this stage. I don't see why our profit shouldn't be higher than that because if by '22, '23, let's just do the math, right, by the end of '22, '23, we've broken even. Then by the INR 150 crores we're talking about. Clearly, we should be at a run rate to deliver this INR 190 crores. I don't see why not. I see, even think about the INR 150 crores -- the breakeven part, why I'm saying this? So last year, Policybazaar in the last quarter made INR 28 crores of EBITDA. The Paisabazaar made about whatever INR 10 crores, INR 12 crores -- INR 18 crores or something of loss. Next year, Paisabazaar or the credit business is going to be breakeven. So there is no reason why Policybazaar do about INR 50 crores of positive, and there is no reason that new business, they take more than INR 50 crores. So at this point, we feel fairly confident about that. Now things change, of course, we'll watch it. But why should things change. Let's see.

Fairly clear. Just one last thing in terms of the split that you gave for new and renewal, the renewal rate seems to have come down. So is it more seasonal or product mix...

No, no, no. That's a wrong conclusion. Please don't -- see, sometimes with over analysis, we get to the wrong conclusion. I can clarify you very, very categorically that our renewal rate if anything has actually gone up by a few percentage point and definitely one was strongest in the industry. In fact, we are positively comprised by it. So do not go to the wrong conclusion, is what I would suggest. You may be getting something more than what needs to be read in the data.

Our next question is from the line of Abhishek Khanna from Jefferies.

Sir, I just had a basic question. Q4 to Q1 because we've been talking about that seasonality in a different quarter. I just wanted to understand Q4 to Q1, we've seen a growth in our renewal revenue. We've seen a growth in our insurance premiums in the disbursals as well. So what really explains that 6%, 7% decline in the existing revenue? Is it some product mix change? I mean, what explains that decline despite we have a 10%, 12% increase that we've seen in the disbursal, premiums, R&D renewal revenues also?

So broadly, if I was to explain to you the 6% decline that we -- or the 4% decline that we see in the revenues from Q4 to Q1 would be probably because of about 8% decline in fresh insurance premium compared to Q4, which is really expected, right? You're comparing the March quarter with the April, May, June quarter in the insurance industry, those are not really very comparable quarters. And I think that is -- there is not much mix change, et cetera. So it's a seasonality, nothing more than that. So not -- I think it's a pretty strong -- your revenue is the same as the strongest quarter of the year, if you come up with revenue, which is pretty much the same, that is a pretty strong result, I would say.

Just to add, I would encourage you to look at the industry statistics, which come out every month and have come out for the first quarter. So you'll find that there is the industry seasonality is much more than the seasonality that you're seeing over here.

No, no, I totally understand that. But the question that I had was because your premiums are declining. So are you saying that the decline is in your fresh -- new business, is that the case...

Shift from -- there may be some higher renewals. We gave you the renewal premium and the fresh premium breakup also, which was the [ 13 30 ] and whatever. So -- and the [ 10 40 ] renewal premium. So all I'm saying is don't [indiscernible] money to a 4% shift...

Sure, sure, sir. And just one more question. When you say that on the renewal revenue, your margins are about 85% or so. Is that all of the costs taken from that revenue. Is that...

Everything taken into account, we do our internal analysis fully loaded. It's about 85%. So we have done this analysis multiple times at 85%.

That's broadly the margin...

Yes, telecom, people, management, everything gets into it.

Got it. And just one last question on that because I remember that number being 90%. I know it's not a material ship, but then last year revenue are..

[indiscernible]

Now that this 85% number you're saying should be inclusive of all costs and should stay as it is right now. So the 85% number going forward should also be a good approximate number?

Because -- see, as years go by, you have to understand the renewal dynamic, right? First year, it is x; next year, it is more than x; third year, it's more than x -- [indiscernible] third year 97% [indiscernible] year. Hopefully, as our book builds up into the future, it should be reducing, the cost of doing the renewals will be reducing. But 85%, it was a good enough, yes.

We'll take a next question from the line of Umang Shah from Arohi Asset Management.

The first one is on Slide #3. If we have the year-over-year premiums increasing from INR 1,594 crores to INR 2,430 crores. How much of the growth is explained using new initiatives? And how much is the growth in the core Policybazaar business, if you could help us appreciate that.

We haven't shared this breakup. But again, you can do the math based on the revenue, right? You can get to some numbers. Obviously, there is the new initiatives add to the growth and there is growth in the existing business as well.

Its INR 134 crore revenue there, on the new initiatives. And if you take away the credit revenue, there is probably 4 -- sorry, there is probably INR 290-odd crores of revenue here on the existing businesses. You could -- you could perhaps take some kind of a split to that.

Got it. Got it. But is there a material improvement in take rates? Or is the entire growth in the revenues explained by growth in premiums?

The take rate has improved materially in one of the segments. We'll just leave it there, but it improved materially in one of the segments, [indiscernible] in the existing business.

Got it. So hence, Yashish, as I just wanted to understand the premium growth in the core.

Sorry, can you repeat that?

Yes. I just wanted to understand the premium growth because we have some revenue growth. We are experiencing an increase in take rate. And hence, I wanted to understand the premium growth.

Sorry, just to be clear, the take rate point that Yashish was making is in a particular segment of our existing business. On an overall basis, the take rates are fairly steady. Take rate expansion is not a key driver of the whole thing.

Understood. Got it. Got it. The second question I had was to Naveen. Could you share the contribution margin for Paisabazaar?

For the credit business, contribution margin at our business level, we are not sharing, but in overall revenue, we shared that number, which is about 45% between both insurance and credit business.

So is the credit business higher or lower than this number?

It is -- it is lower than this number, but let's not get into further details.

Yes. I think if you wanted to get into more tail, you could refer to slide number...

So there is a slide in the presentation, which is Slide number what -- 36, where you can see how the lending business has been moving.

Yes. That gives you an indication of how the EBITDA margin is improving over a period of last 2 years. And how we're getting close to the profitability.

Got it. The last question I had was the outlook on the retail protection side. If you see the industry, a lot of the life insurers are reporting massive drops in retail protection. And given that we are market leaders in that space, how does it impact our business? And how do we think about growth in business is more from a medium-term view?

I think there are 2 things to understand about retail protection. The number of people in India who are -- is only 60 lakh or so. So there is a large opportunity that is available for term insurance in India. So the medium to long-term view on this, I think segment is very positive. What has happened in the near term is that as of COVID, the industry went through a significant shift in terms of both process and price. That, as you see in this quarter from the came together because last year was a very high demand quarter. Now going forward, what we expect is, the processes have largely stabilized. Pricing also has largely stabilized because of the new use and file regulations, you're going to get new products, much more innovation in this category as we go forward. And I think you will find that the category will build as we go through this year. So we are actually very optimistic about term and protection in general. And I think you will see that building as we go through this year.

I want to say something in addition to this. And I'm seeing something having watched this industry now for the last 13, 14 years and pretty much Policybazaar being at the forefront of this old term insurance market -- take my work, however, whatever you think there was. See from 2009 to 2017, you saw a steady decline every year in term insurance prices. And I think certain new channels were really, really opened up in about 2016, '17 in that time frame. And I think those who I even know of the market know which channel those were. And I think there was a differential experience very clearly on the claims ratio. And so when that hit the reinsurance because essentially the same prices that were coming through that the direct channel or the digital channel or us and the insurance company's direct platforms was also extended to certain other channels. And that has a dramatically negative effect on the reinsurers. And now at least has acknowledged in some circles. And that led to essentially a negative surprise for -- to at least [ RT ] and a few other reinsurers. [ RT ] essentially pretty much pulled out and then there were [indiscernible] insurers, everybody was a bit worried. My assessment is there is a very clear understanding at the reinsurance and now that there is differential risk across channels. And I don't talk about just Policybazaar here, okay? I talk about the entire Policybazaar, the insurance company's websites, et cetera, they are at a differential risk for disclosure reasons, for whatever reasons. Because of the amount of effort that has been put in -- in the checks and balances that have been put in place. And if you wish, at some point, I would love to for a select group of you post a 1-hour session [indiscernible] what kind of checks and balances have been put in place, which leads to that. And because of that, the reinsurers, in my opinion, are willing to support some kind of different prices across these. Now it is up to insurers to take to not take those. And to some extent, that will determine the future of the industry. I do think some insurers are taking those, so insurers are not taking those as of now. But the industries in that zone, that's my assessment of the situation. I think the market will grow. We continue to do a good quality business. We haven't seen what has been reported in the media or whatever been, whoever has been reported that data, we have not seen and our data is quite out there. But I cannot leave it there. And I'm not talking about term versus stock, et cetera. I'm talking about just term, term, term, that's it. So for those who understand there is a [ PROP ] segment and there's a term segment and the [ PROP ] can have slightly higher premiums, but the risk component limited. So you guys know all this, yes. So for the one who know you already know it.

We will take that as a last question. I now hand over the floor back to the management for closing comments. Over to you, sir.

Thank you very much to all of you for all your participation and all your questions. Very heartening to see the participation. And we look forward to speaking to you in another 3 months' time. Thank you for now. Have a good evening. Bye.

Thank you. On behalf of PB Fintech Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.