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BofA expects PB Fintech and Paytm to post strong Q2 FY27 growth, but regulatory changes could affect the two differently. It cut PB Fintech’s price target by 19% to Rs 1,145, while maintaining a Buy rating on Paytm with a Rs 1,775 target. The brokerage estimates that PB Fintech’s earnings per share (EPS) could decline 39-41% in FY28 and FY29 if the proposed rules are implemented in their current format. However, it maintained its Neutral rating on the company. The concerns follow IRDAI’s consultation paper proposing changes to insurance commissions. PB Fintech’s shares had fallen sharply after the proposal as investors assessed the potential impact on Policybazaar’s commission income. Despite the regulatory concerns, BofA expects PB Fintech to post 31% year-on-year revenue growth in Q2 FY27, while premiums are projected to rise 35%. Revenue is estimated at Rs 2,115.7 crore, compared with Rs 1,613.6 crore in the year-ago quarter. PB Fintech’s EBITDA is expected to more than double to Rs 204 crore, with its EBITDA margin improving to 9.6% from 7.4% in Q1 FY27. Profit after tax is estimated to rise 62% year-on-year to Rs 218.7 crore. Paisabazaar is also expected to record 26% year-on-year revenue growth. BofA believes PB Fintech could reduce some of the impact of lower commissions by cutting call-centre and customer acquisition costs. According to the brokerage, around 25% of its call-centre sales staff generate 65-70% of sales, while 80% of customer traffic comes directly to the platform. The company could also increase its focus on products such as loans and credit cards. Due to the regulatory uncertainty, BofA lowered the valuation multiple for PB Fintech’s core business to 20X from 25X and increased its WACC assumption to 14.6% from 13.6%, which resulted in the 19% cut in its price target. Paytm, meanwhile, is expected to benefit from the implementation of a 40 basis point merchant discount rate (MDR) from October 15. For Q2 FY27, BofA expects Paytm’s revenue to grow 28% year-on-year to Rs 2,641.3 crore, led by 31% growth in payments and 44% growth in financial services. Its EBITDA is estimated to rise 86% to Rs 263 crore, while net profit is projected to grow 76% to Rs 271 crore.
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