As profits soar, PB Fintech takes a second bite at mutual funds

Mint

4 days ago

PB Fintech will re-enter the fee-based mutual fund business to gain another source of revenue under the PB Money vertical, management said during the analyst call for Q1FY26, after profits jumped in the quarter.
This is PB Fintech's second attempt at entering the mutual fund business. The first, launched in 2019, ended up breaking away into a separate company called Zfunds, led by CEO Manish Kothari, who previously worked at Paisabazaar.
'That did quite well, but there was conflict between management, because of which that group left and set up a separate business. I am a small investor in the company," Yashish Dahiya, chairman and group CEO of PB Fintech, said during the Q1 analyst call on 1 August. Dahiya has a less than 3% stake in Zfunds, which had about ₹1,000 crore in AUM when it was part of PB Fintech.
On Thursday evening PB Fintech reported a 41% year-on-year rise in net profit to ₹85 crore in Q1FY26, and a 33% increase in revenue to ₹1,348 crore. The company's stock opened at ₹1,816.50 on Friday and closed the day around ₹1,780, down 1.76%.
Under PB Money
Dahiya said the business was nascent, and still a tiny part of PB Fintech. It would likely add to the company's personal finance advisory through PB Money. 'It is too early to say how the model will evolve," he added.
The new business will be a part of PB Money, the personal finance arm under Paisabazaar, a wholly owned subsidiary of PB Fintech. PB Money was launched in March and is headed by Santosh Agarwal, CEO of Paisabazaar. It already offers other asset classes such as fixed deposits and bonds.
'Mutual funds are a significant part of household savings in India today, which gives us the confidence that we should be in this space. PB Money is now a much more mature business, and we're in a better position to talk about savings as a real solution. Mutual funds fit naturally into that," Agarwal said during the analyst call.
'While we may not have all the answers yet on what gives us the right to win, I do believe there's room for another strong player in this space. If we execute well, there will definitely be consumer interest," she added.
Red-hot industry
The Indian mutual fund industry's assets under management (AUM) jumped 23% to ₹65.7 trillion in FY25 from ₹53.4 trillion in the previous financial year, according to a joint report by the Association of Mutual Funds in India and Crisil Intelligence, Mint reported in May.
The report said while India's mutual fund penetration (MF AUM to GDP) hit an at all-time high of 19.9% at the end of March, it was still lower than that of many developed economies. 'This indicates there is considerable scope for growth of the domestic MF industry," it said.
In June, Franklin Templeton India Mutual Fund said the mutual fund industry's AUM touched ₹72.2 trillion the previous month. The sector is projected to touch ₹100 trillion in AUM by 2030, according to an Axis Capital report from February 2024.
SBI Funds Management leads the market with ₹11.14 trillion of AUM as of December 2024, followed by ICICI Prudential, HDFC Asset Management Company (AMC), and Kotak Mahindra AMC. New-age firms in the sector include Groww AMC, Zerodha AMC, Bajaj Finserv AMC and, most recently, JioBlackRock.
Analysts' growth concerns
PB Fintech operates a digital marketplace for insurance and credit products through Policybazaar and Paisabazaar. It also houses an agent aggregator platform, PB Partners, with 350,000 advisors.
Total insurance premium grew 36% year-on-year to ₹6,616 crore in Q1, led by a 65% surge in online new health insurance. Core insurance revenue rose 37% year-on-year, while its credit revenue declined 22%. Analysts, however, said more than 30% growth in the term insurance market was unlikely to continue, with the overall segment expanding at around 15%.
'We believe as we grow, we're actually helping expand the market itself," said Dahiya. 'Digital insurance is becoming a more viable and sustainable business model with better cost structures compared to parts of the traditional offline segment, which may face scale issues going forward."
UAE expansion and other initiatives
PB Fintech is also looking to expand its insurance business in the UAE, its offerings for corporate clients under PB for Business, its point of sales person (PoSP) business, and its personal finance arm PB Money.
'UAE has turned profitable, which adds to margins, while our UAE and corporate businesses largely offset each other. Together they're close to breakeven. The PoSP business, meanwhile, has been scaling well with improving margins, driven by better quality of business and a shift toward smaller, more efficient partners," Dahiya said.
He said PB Fintech expects that by next year the new initiatives could reach a point of breakeven. 'But we do want market share and I don't think we will hold ourselves back for any short-term profit delivery target. We will always do what we think is best for the long-term strength of the business," he added.
In May, Dahiya made headlines for launching PB Healthcare Services Pvt. Ltd., a tech-first, integrated healthcare ecosystem. The company invested $62 million from PB Fintech for a 26% stake and also raised $50 million from General Catalyst for 20.57% to set up a 1,000-bed hospital network in the National Capital Region. Though PB Fintech is involved as an incubator, PB Healthcare is a separate entity.