HSBC has downgraded PB Fintech to “hold” from its earlier rating of “buy” and also cut its price target by nearly half to ₹1,150 to ₹2,100.
Incidentally, ₹1,150 is also the level at which the stock had listed five years ago on the bourses, compared to its IPO price of ₹980.
HSBC wrote in its note that the proposed distribution reforms including commission caps for insurance companies will have a material impact on PB Fintech.
As a result, HSBC has cut its Earnings Per Share (EPS) estimates for PB Fintech by 56% for financial year 2028 and by 17% for financial year 2029, as the impact of the lower take rates is partially offset by a slightly higher growth and cost savings.
Only proper regulatory clarity will be a key catalyst for the stock, HSBC wrote in its note.
Motilal Oswal Also Cuts Price Target for PB Fintech
Brokerage firm Motilal Oswal also remained “neutral” on the stock but cut its price target to ₹1,150, same as HSBC, from ₹1,820 earlier.
The revised price target implies a downside potential of another 5% from current levels.
Motilal Oswal said that if it cuts the core online insurance revenue estimates by 30% for financial year 2028, without factoring in any adjustments to expenses or additional revenue streams highlighted by the company, their earnings estimates for PB Fintech would decline by 46%.
At the current earnings, the stock would trade at 73 times. But assuming that PB Fintech is able to cut down on its employee and advertisement costs by 20% compared to the current assumptions, the earnings cut would be about 30% and the stock would trade at 57x.
The brokerage expects the stock’s underperformance to continue until the final regulations are announced.
During the analyst call, PB Fintech’s management warned of a serious impact on revenue on the general insurance side, and that they are exploring options of insurance and reinsurance manufacturing.
The management also said that hiring at the company may slow down as larger agents may not find it lucrative to sell at the proposed commission levels.
Shares of PB Fintech fell 36% on Thursday, the biggest single-day fall on record for the stock. From a 52-week high on Wednesday, PB Fintech shares fell to a 52-week low on Thursday, as a result of the sell-off.