PB Fintech fall wipes out nearly Rs 9,000 crore from mutual fund holdings in a day

Fresh updates from the financial markets indicate that Mutual funds holding of PB Fintech saw the value of their combined investment decline by nearly Rs 9,700 crore on Thursday after the Policybazaar parent plunged 34% following the Insurance Regulatory and Development Authority of India's proposed changes to insurance distribution economics. PB Fintech closed at Rs 1,244 on September 24, compared with Rs 1,886.30 on the previous day.

Mutual funds held a combined 15.15 crore shares of PB Fintech at the end of August, according to Ace Equity data. At Wednesday's closing price, these shares were worth around Rs 28,577 crore. The sharp decline on Thursday reduced their value to around Rs 18,852 crore, implying a one-day erosion of around Rs 9,725 crore.

The combined MF holding is around 32.7% of PB Fintech's equity, based on the September 24 market capitalisation and stock price. This is elevated than the 28.32% mutual fund holding noted at the end of June. HDFC MF has largest exposure

HDFC Mutual Fund had the largest exposure among fund houses, holding 2.52 crore shares worth Rs 4,717 crore at the end of August. A 34% decline from Wednesday's close would reduce the value of this holding by roughly Rs 1,611 crore in a single session.

Axis Mutual Fund held 1.68 crore shares, while Mirae Asset Mutual Fund held 1.54 crore shares. Their August holdings were worth Rs 3,141 crore and Rs 2,889 crore, respectively. ICICI Prudential Mutual Fund held 1.40 crore shares, while Franklin Templeton Mutual Fund held 96.91 lakh shares.

Among other large holders, Motilal Oswal Mutual Fund held 79.41 lakh shares, Nippon India Mutual Fund 83.60 lakh, Tata Mutual Fund 88.24 lakh and Sundaram Mutual Fund 47.14 lakh.

The smallest noted holding was with 360 ONE Mutual Fund at 171 shares, followed by Old Bridge Mutual Fund at 350 shares and Taurus Mutual Fund at 383 shares.

The sell-off followed the IRDAI's consultation paper proposing changes to the economics of insurance distribution, including tighter caps on commissions across health, motor and life insurance products. The proposals boosted concerns over the potential impact on commissions earned by insurance distributors and, consequently, PB Fintech’s topline and margins. Market watchers additionally flagged risks to the firm’s unit economics, with Jefferies estimating that a 10% reduction in commission rates could translate into a 10-12% slide in earnings for PB Fintech. The proposals are still under consultation, with IRDAI seeking comments before finalising the rules.