Financials Shed Rs 1.12 Lakh Crore On IRDAI Shock: Bajaj Finance, PB Fintech Take Heaviest Hits

Financial stocks came under intense selling pressure on Thursday, as investors reacted to higher global bond yields, rising crude prices and fresh regulatory concerns following the Insurance Regulatory and Development Authority of India's (IRDAI) proposed changes to insurance distribution and expense structures.

Twelve financial stocks together saw around Rs 1.12 lakh crore wiped out from their market capitalisation during the intraday session. Bajaj Finance witnessed the biggest erosion at around Rs 29,000 crore, followed by PB Fintech at nearly Rs 20,000 crore and HDFC Bank at around Rs 15,000 crore. Axis Bank lost approximately Rs 14,000 crore.

Insurance-linked stocks were among the biggest casualties, with HDFC Life losing around Rs 7,600 crore in market capitalisation, Max Financial around Rs 6,800 crore and ICICI Prudential Life nearly Rs 3,000 crore. Turtlemint lost around Rs 802 crore.

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Together, the insurance names in the list accounted for roughly Rs 38,100 crore of the total market-cap erosion.

Other financial stocks also came under pressure. L&T Finance lost around Rs 6,200 crore, while IndusInd Bank, IDFC First Bank and AU Small Finance Bank each shed around Rs 3,000 crore in market capitalisation.

PB Fintech Shares Crash 34%

PB Fintech was among the worst-hit stocks on Thursday, with shares plunging as much as 34% to hit a fresh 52-week low of Rs 1,244.50.

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Turtlemint fell 20% to Rs 109.04, while Max Financial declined 12.98% to Rs 1,360.10. ICICI Prudential Life dropped 8.08% to Rs 445.35, while HDFC Life fell 8.46% to Rs 514. Star Health declined 6.59% to Rs 513, while SBI Life fell 3.41% to Rs 1,699.90. ICICI Lombard was down 2.33% at Rs 1,465.60 and LIC declined 2.21% to Rs 398.50.

IRDAI Distribution, EoM Proposals Trigger Selling

The sharp fall in insurance-linked stocks came after IRDAI issued a two-part consultation paper proposing changes to distribution regulations and expense of management (EoM) limits. The proposals seek to change how insurers and distributors can incur expenses and pay commissions, with the regulator looking to reduce distribution costs and improve the alignment between customer acquisition efforts and compensation.

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The proposed framework has raised concerns over the near-term impact on distributor economics, particularly for companies whose business models are closely linked to insurance distribution.

Brokerages Assess Impact On PB Fintech

Bernstein said the proposed commission cuts were “far more severe than expected” and identified PB Fintech as potentially the most affected company. The brokerage also expects the proposals to put some pressure on health and term insurance growth.

However, Bernstein said LIC and SBI Life could be relatively better positioned due to their lower costs and greater agency and ULIP mix. It also expects significant pushback from the industry, while noting that lower distribution costs could eventually benefit customers and potentially support volumes.

Macquarie said the proposed framework could favour tied-agent channels over bancassurance and broker channels. It estimated that first-year commissions on pure-term policies could be capped at 25-30%, while EoM limits could move towards 12.5% for life insurers and 20% for general insurers over five years.

Jefferies estimated that a 10% reduction in commission rates could result in a 10-12% decline in earnings for PB Fintech and Turtlemint, underscoring the sensitivity of insurance distributors to changes in commission structures.

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