Shares of Policybazaar parent PB Fintech gained on October 1 as Jefferies issued a 'buy' call on the stock with a target price of Rs 1,800 per share, following management's clarification regarding a planned investment of $100 million for acquiring a 20-35 percent stake in a new healthcare venture.
PB Fintech's liability will be limited to this initial investment, while the new entity is expected to generate its resources, said Jefferies in a note. The final details and board approval are anticipated to take a few quarters.
Analysts believe this investment clarification addresses concerns about PB Fintech's balance sheet, ensuring it remains asset-light.
At 9:18 am, PB Fintech shares were trading marginally higher at Rs 1,625.85 on the National Stock Exchange (NSE).
Bernstein has also reaffirmed its 'outperform' rating on PB Fintech, setting a price target of Rs 1,760. They noted that while investors are attracted to PB Fintech’s high growth and strong business model, some may view this backward integration into healthcare as a significant shift from its capital-light business model, which appears to be weighing on the stock currently.
Yashish Dahiya, Chairman & Group CEO of PB Fintech recently that the planned health venture will be an HMO (Health Maintenance Organisation) model aimed at alleviating the trust gap between hospitals, insurance companies, and patients.
"In India, there is enough demand for healthcare I don't think that is the challenge. I think everybody has their own market. This is meant for middle-class India. That middle-class person cannot afford Rs 78,000 per room night," Dahiya said.
PB Fintech may invest up to $100 million in the new healthcare company for a 20 to 30 percent stake, subject to approval from the company's board. It will be a one-time investment and there is no plan to make any further investments, the company said.
Further, the new healthcare company aims to generate its resources for growth and may attract private equity investors and other financial institutions, Dahiya added.
Alok Bansal, Co-founder and Executive VC of PB Fintech explained in an interview with CNBC-TV18 that while the asset side, like hospitals and infrastructure, is crucial, PB Fintech’s focus will be on the operation and management (O&M) aspect, which directly controls the customer experience.
PB Fintech shares closed nearly 2 percent lower at Rs 1,608.45 on the NSE in the previous session. The stock has zoomed 100 percent so far this year, outperforming Nifty's returns of 18 percent. In the past 12 months, the counter has surged 111 percent, more than doubling investors' money. In comparison, Nifty rose 26 percent during this period.
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