The shift stems from a consultation paper released by the Insurance Regulatory and Development Authority of India (IRDAI), which proposes lower caps on commissions and expenses of management (EOM), a move toward effort-based payouts for distributors, and restrictions on so-called dark patterns in insurance sales.
Aggarwal expects PB Fintech‘s 2027-28 (FY28) revenue to fall around 30% if the rules are implemented, with earnings falling further, in the range of 40-50%, since a portion of the company’s costs cannot be cut quickly.
The paper triggered a sharp reaction in insurance and distribution stocks on Wednesday (September 23). PB Fintech was among the hardest hit, with shares falling 35% in a single session. Aggarwal called it a rare move, noting some investors bought the stock on the decline. He said the reaction pointed to a regulatory risk in the sector that markets had not previously priced in.
Aggarwal said the redistribution of power will not be uniform across the industry. Insurers seen as less exposed to the new rules, such as ICICI Lombard, held up better on Wednesday and even closed higher, while distribution-heavy platforms such as PB Fintech and Turtlemint bore the brunt of the selloff.
PB Fintech held a call with investors after the paper’s release, where the company said it could offset part of the impact through cost efficiencies. Aggarwal said the damage would still be significant if the rules take effect from 2027-28. Motilal Oswal has kept a Neutral rating on the stock, applying a 50 times earnings multiple based on an average of its base case and worst case earnings scenarios. “We have been maintaining a neutral rating on this name,” Aggarwal said, noting the brokerage reiterated the view in a note published after the call.
He said the near-term outlook for PB Fintech remains under pressure, with a bias toward further declines until there is more clarity on the final rules. He added that investors may look beyond 2027-28 once the company can show it has arrested the earnings decline through cost measures.
Banks with bancassurance income face a smaller impact than pure insurance distributors, Aggarwal said, since insurance is only one part of their business. He named Bandhan Bank, Axis Bank, IDFC First Bank and IndusInd Bank as the private banks most exposed, estimating a single-digit percentage decline in return on assets (ROA) for these lenders.
Aggarwal also commented on HDFC Bank, where the Reserve Bank of India (RBI) is expected to announce a new chief executive officer soon, with Anup Bagchi seen as the leading candidate. He said the bank has faced pressure in recent years from integration challenges following its merger with HDFC Ltd, and that 2027-28 will likely remain a soft year, partly due to the impact of foreign currency non-resident (FCNR) deposit inflows on sector margins. He expects growth and profitability to improve from 2027-28 onward as merger-related issues ease and leadership stabilises.
For the full interview, watch the accompanying video
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