PB Fintech and Paytm Growth Expectations for Q2 FY27

PB Fintech is anticipated to demonstrate strong performance in Q2 FY27, with BofA projecting significant growth; however, regulatory adjustments may influence these results differently for PB Fintech and Paytm. The price target for PB Fintech has been adjusted downward by 19% to Rs 1,145, while Paytm retains a Buy rating with a target of Rs 1,775.

Projected Earnings and Revenue Growth for PB Fintech

BofA forecasts a potential decline of 39-41% in PB Fintech’s earnings per share (EPS) for FY28 and FY29, should the suggested regulations proceed unchanged. Nevertheless, the brokerage has maintained a Neutral rating for the company. These concerns arose from the IRDAI’s consultation paper, which advocates modifications to insurance commissions. Following this announcement, PB Fintech’s share prices experienced a notable drop as investors evaluated the possible repercussions on Policybazaar’s commission income.

Despite these regulatory dilemmas, BofA projects a year-on-year revenue increase of 31% for PB Fintech in Q2 FY27, alongside a 35% rise in premiums. Revenue is forecasted to reach Rs 2,115.7 crore, compared to Rs 1,613.6 crore from the same quarter last year. Moreover, PB Fintech’s EBITDA is expected to more than double to Rs 204 crore, with the EBITDA margin improving to 9.6% from 7.4% in Q1 FY27. Profit after tax is estimated to grow 62% year-on-year, hitting Rs 218.7 crore. Paisabazaar is also anticipated to experience a 26% year-on-year increase in revenue.

Strategies to Mitigate Regulatory Impact

BofA suggests that PB Fintech could lessen the impact of reduced commissions by minimizing call-centre and customer acquisition expenses. The brokerage reports that approximately 25% of its call-centre sales team is responsible for 65-70% of total sales, while 80% of customer traffic directly accesses the platform. There is potential for the company to enhance its focus on loan and credit card products.

In response to the ongoing regulatory uncertainty, BofA has adjusted the valuation multiple for PB Fintech’s core operations from 25X to 20X and raised its WACC assumption to 14.6% from 13.6%, which is the basis for the 19% reduction in its price target.

Paytm’s Positive Projections

In contrast, Paytm is expected to gain from the introduction of a 40 basis point merchant discount rate (MDR) effective from October 15. BofA anticipates that Paytm’s revenue will increase by 28% year-on-year to Rs 2,641.3 crore in Q2 FY27, driven by a 31% growth in payments and a 44% rise in financial services. Its EBITDA is projected to rise by 86% to Rs 263 crore, while net profit is expected to climb 76% to Rs 271 crore.