Turtlemint Fintech Solutions Limited (TURTLEMINT) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Q1 FY '27 Earnings Conference Call of Turtlemint Fintech Solutions. [Operator Instructions] Please note, this call is being recorded. I would now like to hand over the conference to Mr. Nitin Garewal, Head, Investor Relations. Thank you, and over to you, sir.

Good evening, everyone. Welcome to Turtlemint's earnings call for Q1 FY '27. Joining with me on the call are Mr. Dhirendra Mahyavanshi, Chairperson, MD and CEO; Mr. Anand Prabhudesai, Executive Director and COO; and Mr. Badri Sanjeevi, Chief Financial Officer. We would like to highlight that the management may make certain statements that may be forward-looking in nature. Please be advised that our actual results may differ from these statements. We do not guarantee these statements or results and are not obliged to update them at any point of time. I'll now hand over the call to Dhirendra.

Thank you, Nitin. Good evening, everyone. I'll start with some update on the overall business, and then we will cover the details during the question session. At Turtlemint, our mission has always been simple: to make insurance easy to understand, accessible and trusted for every Indian household. When you look at insurance penetration in India, there is a very large opportunity ahead of us. This is particularly true in B30 and in the underserved markets where potential policyholders need not just access to products, but also the right advice and support. We believe the combination of technology and a strong distribution network is the right way to solve this. A big part of our growth strategy is that we -- what we call RAP, Recruit, Activate and Produce. We recruit individuals at scale, onboard them seamlessly onto Turtlemint Pro platform, train them and then help them become productive over time. In Q1, we recruited more than 32,000 digital partners, taking our total DP base to about 690,000 plus. We continue to invest significantly in training our digital partners across product knowledge, soft skills and marketing skills so that they can build a long-term career in insurance. In Q1, Turtlemint Academy, our digital training platform had around 55,000 monthly active users. The impact of these efforts has increased engagement and activation levels in our platform. Our past 3 months' active DPs increased to 90,791 in Q1 compared with 72,244 in the same quarter last year. Another important part of our model is the relationship we have built with insurance companies. We work closely with our insurance partners to help them identify new pockets of growth, while also enabling them to manage underwriting at a very granular level. In Q1 FY '27, for 17 insurance companies, our growth contribution was at least 2x of the overall industry growth. If you look at the insurance purchase journey, one of the biggest challenge is actually getting and generating customer intent. This is where a significant amount of cost and investment goes. Our approach is built around solving exactly this problem. We bring together a strong technology platform and a large network of trusted advisers who can help customers understand their requirements, compare products and make the right insurance decision. Our policy count up to Q1 now has touched 3.1 crores. For us, the relationship with the policyholders does not end with once the policy is sold. Insurance is fundamentally a business of trust, and that trust is required when a customer buys a policy, but it becomes even more important later when they need servicing, when the policy comes up for renewal and more importantly, when there is a claim. As insurance brokers, we represent the policyholder and support them across these requirements. We have, therefore, built our platform around the entire policy life cycle rather than just the point of sale. During Q1, we had policyholder settled claims amounting to more than INR 26 crores, where there would have been some complexity, delay or rejection. We handled around 1.5 lakh plus unique servicing requests during this quarter. Now some key business highlights of Q1. We started FY '27 on a strong note. Our platform premium grew 49% to INR 1,204 crores. A large part of it comes from B30 markets. Our P3M Active grew by 33% Y-o-Y basis. Our revenue grew by about 40% to INR 294 crores. We saw strong growth in renewal. Our renewal revenue grew by about 58%. We have stated earlier, in our earlier call that we are in the business of book building and renewal, as we all know, is a, [ accrual ] is a -- provides annuity to the business and also provides higher margins. Our service EBITDA grew by more than 90% to INR 39 crores as margins continue to expand. Our operating leverage comes from the shrinking of corporate overheads as a percentage of the revenue, and that continues to happen. On a Y-o-Y basis, our corporate overhead as a percentage of revenue came down from 32% to 22% -- sorry, from 30% to 22%. Led by strong growth, margin expansion and operating leverage, our adjusted EBITDA loss as a percentage of revenue compared to last year of minus 21% is now minus 9%. From a long-term view, our service EBITDA expansion continues through the strong renewal book that we have built and productivity gains. Our corporate overheads continue to reduce, and we expect over the next 4 to 5 years for it to come below to 7% to 8%. Now I'll let Anand cover the tech and AI part and the other initiatives that we have taken.

Thank you, Dhirendra, and good evening, everyone. I want to spend the next few minutes on a few things that are central to how we think about the next phase of settlement, cross-sell; second, our AI strategy; and finally, how we are building claims into a genuine point of differentiation. Our cross-sell focus is on getting motor, acquire digital partners to sell health and life. And the way we drive it is through structured continuous training. We teach a new skill, deepen the capability through support of subject matter experts on live cases that the DP is working on and then reinforce performance through feedback. We track the cross-sell activation funnel rigorously. Year-on-year, we have been able to grow motor-only digital partners starting to sell health by 40%-plus. Cross-sell activation is an important part of our strategy to profitably drive growth in health and life business without being in the chase for that same limited set of agents that are fiercely competed for by everyone else. [ Crew ] for us starts with how efficiently we can bring on new digital partners onto our platform and make them productive. We have built an entirely digital onboarding journey, no paperwork, no branch visits. And through this funnel, we've recruited over 690,000 digital partners like we've already mentioned. We are now layering AI directly into the DP acquisition funnel. Our new DP onboarding rate continues to improve this year as compared to last year. Another success story on artificial intelligence for us has been on renewals. We have deployed voice AI agents to make calls to help customers with end-to-end renewals. These AI called customers show a renewal rate that is higher by 500 basis points, primarily due to stronger follow-ups and use of local language at the AI. AI also now handles 55% of our support tickets. Nearly 2 million documents were fully processed using AI last quarter. AI not just is improving efficiency, but also it improves customer experience. Across various processes, we have seen our tags reduce by 15% to 60%. We are pushing AI adoption in other areas of our work that support the business. All our teams, be it product, technology, marketing, content or analytics use agentic AI to automate various tasks and drive better outcomes. To share one metric, in the last quarter, 75% of the new code we generated was generated using AI. Finally, I would like to update you on what we are doing on claims because this is where we earn the right to customers' trust. Dhirendra already mentioned, we handled over INR 26 crores of claims in this quarter. Our claim journey is designed for 0 paperwork stress end-to-end. Once the customer reaches out, she is assisted by a dedicated claims team that connects with her and takes complete charge of processing the claim. Customers get live claims tracking on the Turtlemint app, and we also have an expert evaluate each and every claim to deliver the best possible outcome. So this expert could be a medical doctor, for example, in a health claim and a trained surveyor for a motor claim. We also run a regular review process with each of our insurers on claims experience for our customers to drive improvements. The claims process is supported by automation tech to improve case evaluation, tracking and prompt turnaround to customer's satisfaction. We see significant opportunities here to differentiate ourselves from other brokers, and we will continue to push the benchmark for customer experience in this area. With that update, let me hand it now over to Badri, our CFO, who will walk you through the financial highlights of Q1 FY '27.

Thanks, Anand, and good evening, everyone. Q1 FY '27 has been a strong quarter in volume and revenue growth while expanding on our margins. Platform premium for the quarter was INR 1,205 crores, which has grown by 49% year-on-year. Our revenues for the quarter was INR 294 crores, which was a growth of 40%. Our revenue growth continues to be underpinned by growth in the active digital partner base. Our P3M Active base meaning rolling 90-day active was just above 90,000 active digital partners for the quarter, which was a growth of about 30% year-on-year. This growth comes both from strong retention of prior recruited digital partners on our network and new recruitment in the quarter. Our renewal revenues grew to about INR 65 crores in the quarter. Across all product categories that we sell insurance policies in, our renewal rates are significantly stronger than the industry. Service EBITDA continues to grow faster than our revenues. Q1 FY '27, service EBITDA has grown at nearly 90% to reach INR 39 crores for the quarter. This is approximately 13% of our quarterly revenue. Core business service EBITDA are fixed in nature, and we expect them to increase in line with inflation. These costs are primarily people costs and vendor costs. People costs related to tech teams, corporate functional teams, certain back office operating teams, category management and business development teams. Vendor costs relate to our spend in marketing, tech tools and other operating costs. These costs have increased by only 5% in Q1 FY '27 to INR 66 crores for the quarter. As a percentage of revenue, it has declined from 30% in Q1 FY '26 to 22% in the current quarter. Adjusted EBITDA for the quarter was INR 26 crores loss or approximately minus 9% of revenues and this represents about 37% absolute improvement towards the prior year. For Q1 FY '27, our profit after tax, PAT was a loss of INR 38 crores or about minus 13% of revenues. This has improved from INR 47 crores loss for the prior year, which was nearly 22% of revenues in that year. In summary, the key elements of our growth have been about executing on the following 4 operating principles: A, strong volume growth and revenues in our platform; B, continuing to grow the renewal revenues, which are a key driver for scale and profitability; C, maintain strong operating leverage in our business; and D, be disciplined in cash management and working capital management that keeps our cash conversion from profitability very high. Thank you. I'll conclude my remarks, I hand back to Nitin.

Hi, we can take the Q&A.

[Operator Instructions] First question comes from the line of Prayesh Jain.

Congrats on a good set of numbers. Just a few questions. Firstly, what brings seasonality to your business, particularly given that I think the assumption is the PoSP business is motor heavy. So what kind of brings in such a strong seasonality to your business?

Right. Thanks Prayesh, for the question. So, purely from a motor industry point of view, it is -- if you look at how the market operates, H1 is about 45%, H2 is about 55%. The seasonality is driven by some festival factors like, for example, OND is a big festival period when vehicle sales are higher, JFM being the last quarter, the vehicle sales are higher. And we operate in the rollover of the renewal market. So when these vehicles come for renewal and that's when we get the business, so it follows from there. Basically, that's how the market is. So Q1 for the market usually is about 16% to 18% better than the Q4 market and which is what we see in our business also. Having said that, if you were to look at quarter on -- Y-o-Y growth for Q1 over Q1, we have -- like, for example, health has grown at about 45% plus. Term Life has grown at about 60% plus. And so this continue to grow even though Q1 is lesser compared to Q4. But you will see this, like we discussed in the last call, Q2 will be bigger than Q1, Q3 will be bigger than Q2, and Q4 obviously will be the largest quarter for the...

Okay. So you're saying health has grown at 45%, while your overall premium growth has been 50%. So life is driving and volume -- motor is driving because health -- either way is a small portion. The motor growth still remains to be very strong upwards of, say, 50%, right? That's a good conclusion.

Yes, so our growth comprises both the factors, the PoSP growth and also the platform premium. We also launched on Turtlefin one new platform with one new partner and so that has also helped us in that.

Got that. Got it. Second question is on the take rate. That is primarily because of the stronger revenue -- stronger growth on the renewal business, right? Nothing else that has impacted the take rates, right? Or is it also some GST elements, anything of that sort?

No, no impact. Take rates are more or less similar of what it was before.

So basically, it's a mix of renewal versus fresh, that's the only change.

Yes.

Right. And the other element is, if I look at the costs, right, if we just do some back of the envelope calculations, overall other expenses have gone up by 35%, right? And so cost per DP seems to be increasing by 12%. Why is that so?

Okay. When you look at other expenses, that includes all the costs, including the PoSP commission, Prayesh. The way to kind of really understand as we present in service EBITDA terms is that if you see service EBITDA last year versus this year, we have improved it by about 3 percentage points. Now this includes a combination of productivity gains that we see from our frontline sales employees and also what optimization we're able to do and improve on the commission costs that we incur. Roughly out of the 3% improvement in service EBITDA from last year to this year, roughly 2% of it comes from the non-commission operating costs, which is all the people costs and the tech costs that we have above service EBITDA and the remaining 1% also comes from the commission cost. So that is the way it's been. Otherwise, your overall comment of saying that other expenses have grown, of course, there is volume-driven increase, which, of course, commission costs have increased in line with top line. That really is what determines that particular percentage that you spoke about. Hope that was clear.

Yes, yes. That's pretty much helpful. The other question is on the regulations part. You have the motor TP pricing element that was suggested by the Supreme Court. Do you think that could have a meaningful impact on your business on the renewal part, particularly? And the other question, again, probably this has been discussed even in the previous call. But just to put this, the commission regulations for -- if it comes through, okay? Now for example, you have INR 100 of premium today and you have a take rate of take rate -- you earn INR 100 and out of that, you're paying INR 70 as -- sharing with the distributors. Now -- so you're earning INR 30 net of sharing. So if the commissions are, say, cut by some percentage points, you maintain the ratio or you also take a hit? How does this happen? How would you think about this? I'm sure that there is no -- there is still uncertainty about whether commissions are being cut or not. But just hypothetically, if for some reason like -- even at the time of GST, the commission were cut, so you kind of maintained your margins and let the distributor take the full hit or you also took some hit? How did that happen at the time of GST? So these are my last 2 questions.

So, Prayesh, related to the Supreme Court judgment that has come out. So there are 2 parts to that. One is the higher TP reserving that the insurance companies will do. That is a little sort of right now, what we hear from the insurance companies is that other than ICICI Lombard and maybe one more insurance company, other insurance companies are waiting for the GIC's appeal in the -- GI Council's appeal in the Supreme Court and waiting to hear the outcome of it before they look at their provisioning. And the ramification of the impact of the industry are yet to be ascertained. But from the seriousness of getting all the vehicles insured point of view, it is definitely sort of a very important point because like we all know, more than 55% of the vehicles are uninsured even for TP and which is where a distribution platform like us come in play, where we are able to carry out this distribution in the last mile, even those markets where the TP penetrations are very, very low. Now if there is an implementation of a policy, like for example, denial of fuel is one of the things that is being suggested that if anybody without a TP policy should not be given fuel and bring some kind of control. What we have seen in the past is, when this 2-wheeler fines were implemented in 2019, the awareness of this requirement for a TP policy goes up significantly and the demand shoots up. And then you see a surge in the number of policies that get insured on the platform and both coupled with the distribution network and the increased awareness, it creates a massive tailwind. So whenever it happens, I mean, we are waiting for some kind of movement there, but I think there could be a lot of action in terms of how much growth we can see driven by this particular initiative. From a regulatory, again, I've been asked this in the last call and in many -- during many conversations. We are -- it's a bit speculative, so we do not know. The key principle is that insurance is a business of distribution and tech is the right way to create that distribution through the last mile advisory network. That is something that we have built. The government is definitely -- there is no doubt about this fact that insurance penetration has to be increased and everybody in the country needs to be insured. That is definitely our agenda or part of the developmental agenda. So -- and the industry is large and there's a massive opportunity here. So we'll continue to grow and continue to execute. The economics, we will see how the economics play out. At least the health example is available in front of us where we have had now at least 3 full quarters of the GST reset related to commission. The overall absolute value in terms of revenue, we have seen growth and we continue to see the growth. Even on the margin levels, we see -- we continue to see good growth. The way we had operated at that time was we -- whatever reset happened in the market, that reset was passed on, but we also saw increase in the volume in terms of how much business started happening on the platform, and that led to growth in both the categories of products that were impacted, life and health. So we are assuming, I mean, that is what will play out. Obviously, once we have more clarity is when you will know our strategy and we will decide what is to be done.

Got that. Just last -- slipping in one more. Any mix that you want to share on fresh and renewal, whether premium or revenues, whatever you can share?

Revenue -- so renewal revenue last year was 19%. This year, it has gone up to 22% in Q1.

We have the next question from the line of Aditya Miglani.