PB Fintech’s Rs 696-crore investment for a 34% stake in PB Healthcare Services, a venture that’s aimed at creating a network of hospitals where costs are tightly controlled, has evoked mixed responses on the Street. The intention is no doubt noble one — to make sure hospitals don’t overcharge patients and that insurers are not cheated. As Chairman & Group CEO of PB Fintech, Yashish Dahiya, explains patients walking into these hospitals will not need to utter the two words: ‘bill’ and ‘claim’.
But PB Fintech’s 180 degree pivot from an asset-light tech platform to an asset-heavy hospital business will be a challenge. While Dahiya gets full marks for having built a great business in Policybazaar, owning a chain of hospitals and being an insurance broker are quite different, say experts. Even Dahiya acknowledges the risks. “There is a 50% chance the project will fail and 50% chance it will succeed,” he says. But then, he’s looking at it from an entirely different perspective. The primary goal, he says, isn’t profit but to boost the penetration of health insurance in India and build trust between patients, insurers and healthcare providers.
To be sure, as Dahiya has clarified, PB Fintech will be a one-time investor — acting as an “incubator” and a “catalyst,” not a long-term owner. Along with PB Fintech’s Rs 696 crore, co-founders Dahiya and Alok Bansal, and some other key executives, will invest Rs 133 crore, taking their collective ownership in the new venture to 40%.
Dahiya has indicated that PB Fintech’s stake will go down to 25% after the first round of external investments which are expected by end-July. At the same time, he isn’t ruling out further infusions. “At this point, I do not envisage PB Fintech investing again, but that’s not a commitment that we never will,” he says. Nischint Chawathe and MB Mahesh of Kotak Institutional equities (KIE) point out that while companies such as Narayana Health are offering closed-loop insurance products to leverage their healthcare ecosystems, it is too early to gauge PB’s success.
Madhukar Ladha, Director-Equity Research, Nuvama Institutional Equities, lauds the quality of the management. “It is a conservative management. They do not overspend on acquisitions,” he observes. While the project could well succeed, since there is a huge unmet demand for affordable healthcare facilities in the country, it could be a time–consuming process. Some experts worry that given the plan is to have five-six hospitals in Delhi-NCR, Gurugram, and Noida, with a total capacity of 700-800 beds, a capital of Rs 2,500 crore may not suffice.
As Sachin Dixit, Director, Institutional Equities Research, JM Financial, points out the healthcare entity may need more funds than the currently planned since capital expenditure and operating losses are anticipated at least in the first few years. “Establishing quality healthcare facilities requires both money as well as time in order to gain customer credibility. He adds that it will take at least two years to stabilise and five-six years for it to be seen as a successful model that can move the needle with insurers.”
The plan to own six-eight healthcare facilities before ramping up franchise-led expansion, he believes, could require a capital outlay of $200 million+, depending on their size. The announcement about the foray into healthcare comes at a time when there are concerns about the core business. The heightened competition in the life insurance sector, following the changes in rules on surrender value and other guidelines, have prompted non-life players to cut commissions. There are also chances of a re-introduction of the cap on commissions.
The PB Fintech stock has corrected sharply losing about 30% in 2025 alone. The concerns include slower growth from ULIPs, which has been among the high growth drivers in the nine months to December, 2024 both for PB Fintech and life companies, slower sales from the motor segment and the absence of near-term growth opportunities for the industry. However, Kotak’s Chawathe and Mahesh believe that the company has multiple growth segments to toggle, acumen to spot demand gaps and the ability to capitalise on the same to sustain 1.8-2.0 x industry growth.
However, Nuvama’s Ladha says a key concern is management bandwidth being diverted from the core business. He is also not sure of how the economics will work out at least in the initial stages until the gestation period is over and the necessary scale is achieved.
No one’s questioning the urgent need for a transparent and efficient healthcare ecosystem, given how medicare costs are going through the roof. According to Dahiya, the average revenue per occupied bed (ARPOB) at leading hospital chains has increased 40-50% over the past five-six years. Ladha, however, notes that while high medical inflation, health insurance premiums are growing at a compound annual growth rate of 15%, incomes aren’t growing at that pace.
Keeping premiums in check could boost volumes, which is exactly what Dahiya is looking to do. Currently, around 40 million Indians buy health insurance annually, paying about `10,000 each — totalling `40,000 crore. However, not all claims are settled. A recent Insurance Brokers Association of India (IBAI) study found that in FY23, insurers settled 85.76% of claims by count, but paid only 51.12% of the total claim value. While insurers blame over-treatment and inflated bills, hospitals argue that rising equipment costs are to blame.
Dahiya’s has proved once he can be a disruptor though it has taken a long 14 years for his business to break even. With some luck, he should be able to do it again.