ET Now: Just with the fact that offline healthcare forays are something that PB Fintech has been looking at for the past several years in terms of this new approach, how do you see this backward integration with hospitals in terms of what it can do. mean?
Manas Agrawal: The media broke the story, and the company did not deny it. Yashish has also talked about this in previous concalls. So, it looks like they want to do this. Now, how to do this is the question, will it be capital intensive or will it be a partnership, it seems like a big question considering the stock because people are buying the story for PB Fintech for strong growth, light business model. I think investor communication on that front will help to curb speculation. And I think the stock is now stable. But the last three days have been volatile. So, clarity up front would be helpful. We have written a note today, which talks about the main question for management. Basically, what is a business plan? It is good for consumers and probably good for hospitals and insurers and therefore good for Policybazaar, but then at what cost does all this come up, that is the key question at this time in mind.ET Now: They have talked about being less capital intensive, which is what you also pointed out in the note. Do you think you will try to build your own hospital? Will there be partnerships with existing hospitals? And more importantly, what better way to do it?
Manas Agrawal: That is exactly the question we have. One of the ways to get closer to capital lights is to do a partnership with an existing hospital. Another way to do capital lighting is to partner with investors and then acquire or build a hospital, whatever. So, option A versus option B, that’s the key question. Another question that needs to be answered is who will spend time from the management team in the hospital business, how will the management bandwidth impact on the insurance distribution piece, which is one of the questions I receive from investors. The other thing is, does Policybazaar in its current form mean to be a capital intensive business going forward or will it remain capital light and what does it mean for free cash flow generation?
So, many questions, few answers, but investors would be happier if it was less capital intensive than more capital intensive and I think investors would be happier if there was more clarity on all these questions.
ET Now: What this means for how health insurance can help you down the road. What do you think is the benefit, if we have more clarity on how it works, how will it benefit consumers?
Manas Agrawal: Sure, it looks like Yashish has a look and I see what he’s trying to do. The problem now is that hospitals look at their bed inventory as a revenue driver and that’s why the price per bed is high and for their business model, it makes sense. But does that mean consumers pay more, insurance companies pay more than they should or at least what makes affordability better for consumers and insurers.
So, if consumers can get access to care at a lower cost and a better claims experience, that’s good for consumers. If it costs less, it means less medical insurance claims, so it’s better for the insurance company. And then, if Policybazaar can drive a better claims experience for insurance companies, it’s probably possible to create a business model with commissions on the insurance distribution side of the business, so that’s it.
ET Now: Is there a case for backward integration like global? Can you expect the same from PB Fintech? How did that really work out?
Manas Agrawal: Not many precedents to go by. We are also actively looking for precedents, but we have seen cases in the US or in Australia in this regard, where insurers have worked with hospitals or healthcare indirectly or directly. There are several examples in the US where healthcare players are ultimately insurance players. But it’s difficult, at least at this point, to point to examples where insurance distributors have gone back and forth with integrated hospital deductibles or health deductibles to produce better customer outcomes. In India, the insurance is not on that scale on the medical insurance side or has no intention of doing so at least.
Regulatory capital requirements are also limited, so maybe Yashish will take up the mantle and do it.
ET Now: When it comes to financials, what do you do about how you can maximize your profits, and increase your profits at the cost of giving up an asset-light model if you decide to invest?
Manas Agrawal: Answer: The first thing that will happen is the cash on the balance sheet which contributes meaningfully through interest income to the bottom line, which will be distributed and the interest income must be contracted, at least in the near term. If and when this will be deployed, if it will be deployed properly, it can generate capital in the long term. But near term, profit or cash flow generation will take a backseat and what to consider in honest stocks.
