First question, a bit of clarification on how or if there is any impact on the business post the GST cuts, which we saw from September 22nd. And this question is both on the consumer demand as well as on your commissions, because we are hearing private insurance companies have reduced distributor commissions.
Let's get to both these answers. I think demand has been very strong, and I would let Sarbvir answer that, but it's been extremely surprising and positive. And on the commission side, it's a complicated situation and I wouldn't go with any of the media narratives or whatever you're hearing out there, because they tend to kind of paint things in black and white. We are a very large source of business, specifically fresh Health and Term. And our business quality is fairly superior compared to many other channels. There are multiple stakeholders here : Insurers, Us, Regulators, Governments, Consumers, our Employees. We are having very constructive conversations. It's not - Do this, Do that. It's a very constructive conversation, and I feel we'll end up in a good place. Sarbvir, do you want to speak about both the demand and the GST impact, please? Yeah, sure Yashish. On the impact, 5 th September and 22 nd September were the biggest demand days, I can say, in the history of Policybazaar, on both Health and Term, as well as for other lines also. On 5 th, of co urse, the conversion was not as good, but on 22 nd, even the conversion was very, very good. What we are seeing is that because of this, there is a lot of dialogue about Health insurance, Term insurance and Life insurance in general, there is a lot of deman d and interest in the category. It is translating into higher conversion , into bookings as well. I think from a demand perspective, it's very good. October, normally with Diwali, etc, can be subdued from an insurance perspective, I think definitely saw a good lift because of this change. I think on the second question on the revenue, which I think Yashish has largely covered it. The only thing I just want to explain to everyone is that I know it's a matter of great speculation and intrigue, but actually it' s not so complicated. There are 3 -4 factors. What is the increase in business that we are getting? What is the quality of business in terms of real fresh versus people who are already existing insurance customers? And the third thing is the P&L impact of t hat for everybody. If you have high-quality fresh customers, the value of those customers to insurance companies is very high. I think we are in a very constructive dialogue, and I think the fact that we have a relationship with insurance companies, and we are not just, I would say, a distributor in that sense, is really coming to the fore right now, as we are having these discussions. We are absolutely committed to working with everybody, or with all our partners, and I think if you hear the calls also, I think all the insurance companies have said the same thing. And we think this will leave the industry in a better position than where we started. And that's the key from our perspective. I'll focus on the second part only. I would say that, yes, we want to ensure that it's a win -win for both. Actually, there are three parts to this thing. It's a triangle always. Consumer, Insurance company, and Policybazaar. All three have to gain. Because otherwise it's a zero-sum game. If you take someth ing from one person, give it to the other. I think all three will gain, and that's what we are really focused on.
Should we see EBITDA margin improvement being sustainable?
I would not read anything into any margin growth, etc. Those things, I think they are just the same. See our fo cus is very clear. Our focus is on growth. Yes, one quarter you may see higher margin. Our revenue for the quarter is ₹1,614 Cr. So, even if that changes by 2% here or there, that is ₹32 Cr positive or negative. What is 2%? It is 2 days or 1.5 days of revenue, or something of that sort. So sometime s, you may get some premium ahead, some payment later. Do not read into margin movements on a quarterly basis, and that's the message I would give. It may be some spill over from previous quarters, it may be some spill over from next quarter. But don't read too much into quarterly margin shifts. There has been nothing dramatic to change our Contribution margin in the last quarter. It is just, maybe some money came from some quarter here and there. Because you'll al ways see this 2 -3% movement from one quarter to the other.
After GST announcement came in, you figured out how to ensure that growth remains on track for September month. Can you talk about what were these initiatives?
The Master Chef never sells their secret sauce. I'll just leave it there. And honestly, there is no secret sauce here. Actually, it's just hard -working people and they just get at it, they figure out solutions, they do it.
Can you share the Contribution margin and EBITDA margin for Core Credit business?
See, so many parameters are there because they have Credit cards, Secured lending, Unsecured lending . So giving a single number becomes very odd for such a large category. They're not very different from what people get in the market.
The ₹1 Tn Premium target - will the GST impact delay it?
The ₹1 Tn Premium, obviously, there'll be a bit of a change because of GST, but how much, whether it delays it by one quarter or two quarters. I love this thing, guidance and all these words. I'm just talking from heart. In November 2022, I just said, yes, at some point we'll make a certain amount of profit. Now, I didn't know that was going to be a guidance, but okay, it's a guidance, fine. And that's the same message that we again put out. These are our aspirations, these are what we can see. And I think to an extent, those numbers are put out there because at that time, they are not the norm in terms of the thought process. And then, when they appear, people say, ye s, this would have happened anyway. Actually i t doesn't happen anyway, it takes a lot of effort, but it somewhere kind of comes out that way. So, the ₹1 Lac Cr was in a similar way. When I made that, I didn't know that GST would not be part of that ₹1 Lac Cr. It may happen one quarter later or two quarters later, because there may be some impact of GST. Maybe there's a 6% impact or something, I don't know, on our accumulated look. So, yeah, we'll see how that how that appears. But yes, I think 3% of that.
Contribution seems to improve despite Health still growing upwards of 60%. What drove the change from Q1 to Q2? And on New initiatives - any timelines on turning to profitability?
On Contribution margin, so that I think I answered, that it may just be, some extra issuance may have happened this quarter, some extra payment may have happened this quarter. All I'm saying is, always assume that 2-3 days of payments can move from one quarter to the other. As long as it's ₹30-40 Cr moving from one quarter to the other, don't take it too seriously. That was really the explanation. Yes, you are absolutely right . For those who may not be aware, fresh health does move at about -20%; so every time we do Fresh Health, our margins get pushed down. In fact, we make a loss, clearly at the Contribution level itself. But then the renewals are growing just as fast, so renewals is also growing at about 50% or so. Only thing I would add. I think it's best to look at it on a rolling four -quarter basis. The only little bit of element in Q2 was that if you see Q1 through Q2, Health renewal growth was stronger in Q2 than in Q1. But again, I think these are small pieces which move up and down every quarter. I think what Sarbvir said just now was the most important thing. That's why we put out the 12-month rolling piece. Always look at that one. That is backward-looking, because 12 months is over, so it's kind of bit dated, but that's almost the best way of looking at our business. It takes out seasonality, and takes out these quarter-on-quarter movements also.
There was a sharp increase in the other expense line item this quarter - up 29% sequentially QoQ and about 67% YoY (₹592 Cr). What exactly sits here, and how to think about this going forward?
Just give us a second here. Could you just kind of try to highlight the number or something because we can't see this sharp increase story? Maybe, we will get back to you.
Hypothetically, if something was to happen on take rate compression and then there is a volume offset, what cost levers do you have to protect your margins? And is there distortion between how take rates are being negotiated on new versus renewal?
So, very quick answers, first of all, and I'm sure Sarbvir will also pitch in on this. Look, in reality, our conversations with most insurers are not as shallow as : This is your commission, take it or leave it, or anything of that sort. It is much more around operating ratios, the quality of the book, around how fast we are growing. And if you notice across channels, what you would notice is, our fresh growth is very high. Our percentage of the fresh is much higher than our percentage of renewal and we and our partners are very aware of our operating ratios, our combined operating ratio, which is actually far more favourable than many other channels. It's only fair that if somebody is growing for you faster, doing higher fresh business, is also doing good quality business, which implies our claim settlement rate is much higher, which is actually a very big positive for insurers. Because if your claim settlement rate is higher, your complaints are l ower, the customer distress is much lower. By the way, when companies do well on the Policybazaar platform, there's also direct traffic creation, which builds direct business for insurers, so it's a little more complicated conversation. We're not just a distributor, we are a distributor, a marketeer, a claims partner. We're a partner in every sense. So our conversations are there and we don't want to comment in the market about which way these are going to end, etc. I think we want to keep our conversations with our partners, which are very constructive, in a closed room. At this point, genuinely we don't think anybody needs to worry about this too much, is the broad answer we would give. On the narrow network, the entire thought process is the same. PB Health is just a word. I have nothing to add on the GST thing. I think the only thing, again, I will just repeat, we have a relationship with insurance companies, and in a relationship, you work things out between the two partners, and do not talk about it too much in public. I think that's what we are also doing. On the cost side, I would say that, please understand that we are focused on cost efficiency in any case. It's not like, because today commissions or something has happened on GST, so we should now look at our costs. We started this whole approach years ago. We look at our costs on a daily, weekly, monthly basis, and actually, hidden in a lot of the overall stuff is that our marketing efficiency has improved quite dramatically over the years, whether it is the proportion of direct traffic that we are able to bring to the platform, whether it is the fact that we are able to leverage our own customer base more effectively , what we call our Growth business, that now has become a big contribut or to our fresh business. It used to be almost nothing. I think we have focused a lot on marketing efficiency, we focus a lot on call centre efficiency, we focus a lot on improving the productivity of our advisors. Irrespective of what is happening, we focus very heavily, and I think we achieve good outcomes there also.
On adjusted EBITDA margins improvement and indirect costs - how should we look at this number on quarterly and annual basis? Also what are Paisabazaar EBITDA margins and renewal premium numbers for PoSP, Corporate, and UAE?
Okay, a lot of questions there, but good. I think when you look at operating cost, specifically fixed costs: Brand, other People, other Office costs, Central cost allocations. We are doing a lot of innovation, we're doing a lot of new segments, a lot of new products, a lot of those things. And thus, a lot of experimentation is going on across the organization. And at an early stage, like, whenever you start a new BU or a new sub-BU, it takes a lot of effort. It takes a while before it scales up. And we've been doing a lot of that, simply because our focus has been on growth. I've repeated this many times over the last 3-4 years, and I think by now you would have seen enough proof of it. See, there are two stages an organization can be in: It can try to maximize profits, or it can drive growth. Usually, both of these don't go together. And, we are in that zone where we're trying to expand . Eventually, we will have enough to take care of all these costs, and that's our approach. In terms of growth rates, they should stay similar to what they have been over the past, maybe a little lower as we progress on the fixed cost side. And again, now coming to margins on the Paisa side, we don't want to comment on this. There's been a slight improvement. I don't want to be exact about the number. I know we were exact last quarter. There has been an improvement, but the improvement is limited, so it's not like a marked improvement and I'll leave it there. Brand is mostly a constant for a few quarters. I think that should give you enough information. On the renewal piece, in the New initiatives, we have about ₹180 Cr for PB Partners, about ₹110 Cr for UAE and about ₹140 Cr for the Corporate business.
On Credit trail revenues which have fallen - what initiatives are being taken to build a higher trail? And on PB Health - when do we start to see the first operations?
On the trail side, we did see slowness, and I think the Credit area has been going through a tough time, and, the NP A rates were higher than we thought for or anticipated. That led to some softening on the P&L side for the partners, and we kind of shared that burden, and hence you see softening of trail revenue. Going forward, we've doubled down on risk assessment, we've doubled down on alternate data collection for consumers, so our ability to basically build quality of business for our partners is increasing as we move forward, and most of that will translate into better revenues. I think as we realized in Policybazaar, being a bucket shop distributor is not sufficient, you have to be more involved, you have to have more inputs into the process, and that is how you will earn properly into the future, but our renewal revenue got affected because our partners, in general, suffered. It could not have been one way, so w e shared in that. On PB Health, I'll try to explain to everybody the way we are thinking about it. First of all, the narrow network is part of the strategy. That look, you have a narrower network, so you have fewer places. The second thing that is part of it is care pathways. That if a customer is ill, they get appropriate care. Whether it needs to be primary care, secondary care, or tertiary care. And in the network, there are hospitals and care facilities that can take care of each one of those, so custo mers are directed on that. And, lastly, there's a technology and hospitals layer, and on that, I think the update is, four facilities have been part acquired, or part whatever, so there's work going on that. But please appreciate, these hospitals will just become part of that network. So eventually, it's about running a narrow network, which will over time, be more and more controlled, or integrated, but it's a slow move again. A bit like I said on Pensions and PB Money. All these things will happen over time. I think the narrow network will come before the facilities. The facilities just become the preferred part of the narrow network, if you would. And, I think that's how you should see it.
Update on Pensionbazaar and PB Money in the last 3 months. How the business has scaled up, and should we see incremental investments into both these New initiatives?
Both PB Money and Pensionbazaar, there haven't been much incremental investments. I think all of it put together, the total investment may be less than half a million dollars. I wouldn't say that anything major has happened yet. Sachin, it's a bit early to really say too much about Pensionbazaar. I think, we've set up a small team, we are looking at various things. I think the good news, I would say is that a lot of changes have come in the NPS scheme, and they're making it more consumer-friendly. It's still a tough business. For 15 years, you have to lock in your money, etc. But I think it's a very serious problem that we are trying to solve, and I think right now we are focused on figuring out our way forward, and I think, we'll have more to say as we go. On both PB Money and Pensionbazaar, we're at drawing board stage. And that's our usual style in such things. Till we are sure about exactly how we're going to do it, we will stay at the drawing board stage, and at some point, we'll become confident and move forward. PB money is exactly the same thing. On the Paisa side, we want to have a more holistic offering. Besides just Credit, we also want to have certain Savings products, etc. But we are not moving aggressively on that yet. Right now, we're still testing. Absolutely. I think with PB Money, we've been able to now put a person's investments in one view, with multiple insights that we're giving consumers. Now, monetizing that for Savings products, of course, is the next step, but again, nothing major has happened yet. We're doing some of the products that launched Bonds and Deposits, but very early stage. Here's some guidance if you want to hear it. On both Pensionbazaar and PB Money, don't expect anything from a results perspective, at least for a year. I think we are in a drawing board stage, and any scale that happens will be irrelevant compared to the scale of our other businesses. But at the same time, here's one more thing, we are deeply committed to both. Sometimes you can be very deeply committed to something, but not act on it immediately, because you don't know exactly how you will act. Both Pensionbazaar and PB Money are at that stage. I do believe Pensions is a very big problem in India, and there will be some solution. We don't know exactly what yet, and similar with PB Money, I think our customers need a more holistic solution. We will figure out exactly how to do it. Also, on both of them, don't expect any significant loss or anything also, either. It's not like we are investing a lot of money in any one of them in the early stages.
With GST exemption being there on your renewal book, do you think there is opportunity and have you seen any evidence in October for cross-sell, or upsell to the same customers who are renewing premium considering their overall payments are declining thanks to GST?
Sachin, if I understand your question, basically what is going to happen is that in Health renewal especially, people will see a lower price, or a much more attractive price, as compared to what they would have seen with GST. So, our objective, and it's, again, early days yet, but our objective is to significantly try to build up our renewal rate. And we measure renewal rate on the basis of number of policies, because number of customers is what really matters. Our first priority is to increase renewal rates, both first year as well as second year onwards. Second priority is what you are, I think referring to, which is to try to cross-sell some more products, to maybe increase the value of the customer, etc. But I would say that it's a second priority. Our first priority, actually, is to increase the renewal rate, because if you think about it, the more customers we can carry into the future, actually has a very high outcome and very high value, versus just trying to increase first -year premium and have fewer customers going forward. So that's what we are trying to do, and we believe that the nature of products we have spoken about it, that the nature of Health insurance products with a higher cumulative bonus is al so favourable, and now with this change, I think we should be able to drive even higher persistency. That's really what our focus is.
In Term insurance, if the 18% GST cut makes premium lower, do you think you will be able to sell more sum assured rather than customer just paying a lesser amount?
Yes, absolutely. In Term insurance, what we are trying to do is that we are saying that you should buy ₹1.5 Cr (₹1 Cr is our most popular price point), because as we've calculated, for most people, it's like ₹100/month extra, and you can get ₹1.5 Cr instead of ₹1 Cr. We are actually trying to increase the sum assured in Term, and saying that, look, this is a great opportunity for you, and you should buy more sum assured. Again, these are slow burns, it's not very easy to drive these things very quickly, but this is a very calculated and very well-oiled effort that we are making to try and drive this going forward. And let's see how it goes.
On the premium slides you have shared, you have also shared the premium calculated using GST exemption at the bottom. If that becomes the norm, should we expect a step decline in the premium you will show on your report?
From next quarter onwards, we will share the premium without GST, and it'll be apples to apples, so the past will also be shown without GST. GST will be removed from the past as well.
Have you launched narrow network policies already? And if yes, what is the share of narrow network policies in the Health insurance business?
Yes, with many of our partners, we have Preferred network policies, where essentially if you take a rider which limits the network, you get a discount upfront. It's a small percentage right now, in the order of 15-20%, and it will grow with time, but I think this is an area which we are very deeply interested in for many reasons. I think this is an area where we will work to make it more and more valuable, so that customers feel the value also of going to a narrow network. It should not just be a cost issue, it should also be a better experience when you go to a narrow network. We are really focused on solving with our insurance partners the second part of the problem as well. We are focused on this one.
If I were to slightly zoom out and look 3-5 years out, where do you see PAT as a percentage of premium by FY30?
I think, about 3% or so.
Moving into Q3, Q4, the Savings high-base effect will wean off. Shall we assume we will move back to 30% plus growth trajectory? Am I correct that by Q4, Savings was already negative for you last year?
Yes, Savings was, but all I'm trying to say is without Savings, we've given the number very clearly. Without Savings, we've been in that zone of 35%45% for a long time, like, 10 quarters is a long time, and we don't anticipate that changing. But yes, we do believe that as we move into the next few quarters, the Saving growth will naturally come back. If you think about it, Q4 last year, was already 20% below Q2. If we just do what we are doing, you will see a kind of decent growth anyway, and we are seeing growth.
Is Pension category part of Savings climbing in the way you had expected it to?
Yeah, so I think, the Pension category, we started about 3-4 quarters ago, so I think that continues to grow, I think both sequentially and on a YoY basis. The Child Education business we have been doing for a while, it does grow, but we've also broadened the appeal. The appeal's essentially that there's a waiver of premium feature that if the person dies, then the premiums are paid by the insurance company in place of that person, so that whatever goal you were saving for, in th is case, Children's education, would be fulfilled. We have extended that same benefit to all other things. Supposing you are saving for your house, you're saving for your retirement, so let's say if something happens to you, then your wife, your family would continue to get that amount of money. We broadened the appeal, we are continuing to drive that. Of course, right now, given the overall business was soft in Q2, I think this part also didn't necessarily grow very dramatically. But it continues to be a key sales pitch, and I would say it's a very real story.
More colour on New initiatives growth. In terms of net take rate, when can you turn the table and start making profits from PoSP?
One of the things that we are seeing in the PoSP side, if you see the growth actually accelerated in this quarter. We grew at 55 -56% in this quarter, and I think what is happening is that: One, we are going deeper into the countryside, we are going to smaller and smaller towns, we have expanded, we're investing behind increasing our team, etc and obviously, they're recruiting more agents, more granular business is coming. And I think the second thing that we are seeing is that a little bit of the industry structure is also favouring us. We are actually, right now the most focused organization on the PoSP side. We've always explained that we bring a huge amount of focus and capability to the table. Some of our peers in that business are going through their own, some kind of corporate actions, and some are focused on other matters. So, what is really happening is that our team is able to drive very effectively. Okay, so I think next year, our hope is that the PoSP business, in the normal course of things, may not have any meaningful loss. We don't want to commit to that, because we will play this strategically. We are very good at execution and we are very focused on winning and adding value to the customers and our partners. We will do whatever feels right at that point which could be anything. But in the normal course of things, I think our losses should be meaningless next year.
Can you break down the PB Partners, Corporate, and UAE premium? And new business versus renewals?
Yeah, so for PoSP, it was about ₹1700 Cr, about ₹415 Cr for UAE, and Corporate was ₹230 Cr. They're fairly similar for Core Policy.
When you visualize the 3% of premium PAT by FY30, how are you really extrapolating the growth in Core versus the New initiatives?
My expectation is PoSP is reaching a point as a channel where I think future growth rates are going to be similar. I don't think the share shift will be too much from here. When we do Health business, we l ose money. And that is why there is a reward in terms of renewals premiums. There could be two ways of paying for anything. Somebody could say, okay, you will be paid upfront, like happens in Life insurance. Or somebody could say you will be paid annually, like happens in Health insurance, or Motor insurance, or General insurance business. There we have that renewal advantage. The renewals part is always a little more predictable than the fresh business. I was just talking to Sarbvir before this meeting, and I was saying, in fresh business, even 0% growth is an achievement, because it is actually hunting every year. Because people have to come in, you have to convince them to buy, and that is why we add a lot of value along with our partners to the industry in bringing fresh customers to the market, both in Health and Term. Motor, at least, they have to buy, so they will buy from somewhere, but Health and Term, people don't have to buy mandatorily. I think but the reward we receive for putting in that effort and actually making a loss in the first year is the renewals, and that becomes a predictable source. So yes, I do think that is what explains it a little more than what the PoSP explains it, and I think PoSP will be a similar share as we go forward. When I say this number, it is a very robust number. It doesn't change very easily. These numbers don't change very easily. Just like our, FY27 guidance was a fairly robust number. It can't change too much. You can't change it by more than 10-20% here or there. And Dipanjan, we are not saying 3% or 2.5% or 3.5%. What we want to achieve and work towards is ₹1 Tn. This is not our objective. Our objective is the ₹1 Tn premium. This is a by-product. But if you do that much, I think maybe the industry wa nts to pay you a little bit more. Maybe you make a couple of percentage points of profit also.
In PoSP, is the mix still predominantly Motor? And what is the diversification progress? And on Savings business, what is the strategy to scale up the hybrid model for Pension?
Yeah, so I'll just take them one by one. I think in terms of PoSP, Motor continues to be the, obviously, a large majority of the business. We are the most diversified in terms of having other lines of business : Life, Health, and other stuff. If I were to look at it right now, I would say, actually, the Motor business is responsible for driving the above average growth that we are seeing. In terms of the shape of the P&L, Motor tends to have little lower retention but also lower costs. Life and Health tend to have higher retention, but you also need to invest in them. So, net -net, I don't think there is that much difference at the EBITDA level. O ur thought process in that business is actually not focused on product, it's focused on the agent. Because our agent is our partner. We have to improve the earnings of the agent. If the agent earns more money by working with PB Partners, he or she will st ay with us longer, and they will see greater value with us. So that is, I think, the crux of the discussion, and that's what we are trying to achieve. That's to give them an earnings opportunity which is superior to what they may be able to do anywhere else. If you ask me honestly, that's what is winning so far. And have the agent's trust. One of the things you will hear as you go around the market, if anybody does the due diligence, is that Policybazaar always pays and it pays on time, those ki nds of things ; does not snatch people's customers ; does not try to steal the renewals; does not try to cut them out of the renewals commission, etc. Those kinds of things you will hear in the market. That is one of the reasons why people are starting to gr avitate towards us. Because eventually, it's a game of trust. I think on the second thing, in terms of the Savings business, yes, absolutely, hybrid has been a driver of our growth. We had done the top 10-12 cities earlier. Now, what we are trying to do is we are pushing into the next 15-20 cities, where we are trying similar models. We have to manage that in a lower cost, because we can't put that many number of advisors in each of those cities but we are doing that, I think we are working on 20 cities right now, and that project is also slowly gaining traction. I think, yes, Savings will require a hybrid approach. Customers like to meet people face-to-face, they want to understand the products taking time, and I think that's something that we will continue to keep driving as we go forward.
PoSP book grew very well in the quarter. Is PoSP model a better suited model for cracking the fresh motor business?
Shreya, I think if by fresh Motor you mean new cars, then, frankly speaking, neither PoSP nor our B2C business actually have very high amount of business coming from new cars. The growth that we saw in Q2 was not driven by new cars, but by actually growing our market share overall, I would say, in the PoSP business. And it continues to be a mix of, like I said, growth in distribution, going to areas that we were not present in, and increasing the share that we are getting from areas that we are already present in. It is largely that which has driven it till Q2.
What is the overall Motor segment growth including PB Partners?
Maybe about 40% or so
Your ₹1 Tn premium can move by one to two quarters - could the net profit guidance of ₹1,000 Cr also get delayed?
If there was a change, I would have said it.
What is PB Connect revenue this quarter? And have you defined ESOP payouts going ahead?
Yeah, the PB Connect revenue for Q2 is ₹66 Cr, 53% up from last quarter. On ESOP pay-outs, they should stay similar now. What you are seeing in ESOP is, we had an old scheme and a new scheme. The new scheme started last year, and the old scheme is going to be phasing out by FY28. So, what you're seeing is, on one side the costs are coming down, on the other scheme, the costs are ramping up. But quite honestly, on an annual basis, you should not see much change. It should see very similar from here onwards.
Non-Contribution expenses (fixed costs) growth has come down to ~15% for the half. How do you see this playing out - will it stay in this range?
15%, yes, it should stay a round this. As I said, every time we start a new business, suppose in Savings, we started a Pensions category. And the Pensions category requires a new BU head, it requires a new focus from a technology perspective, it needs new product people, it does all of those things. And that is really it, and we keep trying out new things? In Health, we will have NRI, we will have old people, young people. Our success is not just achieved just like that. We have all these narrow segments, and thus, fixed costs goes into creating those segments, and making the success of those segments. Now, once those segments scale, the fixed costs are less necessary also. And quite honestly, we've not focused on reducing them, so 15% seems like a safe thing. I do not think it would be very different. It might be a little higher, a little lower. I think maybe between 15-20%. As long as we're giving the 30% fresh growth. I think 15-20% is okay. If we did not do that, then of course this would come down. See the Management rule is quite straightforward. As long as 30% fresh growth, let's not focus on the fixed cost side, let's keep going. If we miss that on a consistent basis, not one quarter or something, but on a consistent basis, then we look at our cost side, and we act on that also. See, if you look at the components of this indirect cost, there are 3 main components. One is the office and office overheads, which is quite slowly linked to the number of people we have to hire, so that behaves more like a direct cost in nature. The second one is brand, where, as we had mentioned earlier in the call, it has become more constant sort of a number, maybe linked to inflation of the country. The third and very big part would be the whole Support teams, IT teams, Marketing teams, Management teams. Obviously, there is an increment which is given. To blend it, and as Yashish said, you can take it to be roughly half of the growth of the top-line growth. And that's where we are comfortable today. And if things change, obviously we'll have a re -look, but we are very happy with roughly half the growth rates for indirect cost relative to the revenue growth rates.
Contribution margin on New initiatives is 5.5% for the quarter. Of this, how much is coming from PoSP, Corporate, or UAE?
It's a combination. UAE, which is now a profitable business, and obviously that profit has increased because last year it was a loss -making business; now for three quarters it's been a profitable business. I think, Corporate has been at pretty much the similar number in terms of burn, and PoSP has been reducing its burn, but obviously increasing its scale also. It's a combination of all three that's coming through. But, as of now, PoSP and Corporate are still loss-making businesses. I think on an overall basis, if you look at all new initiatives put together, my hope is that next year, 2027, our New initiative should be very close to zero. That is the whole thought process, and I don't see why it should be very different. You guys all really want the answer, so I'll give you the answer only. The PoSP CM is 1%. So, yes, if we are at 5%, it's coming from other parts. The biggest contributor in that CM; 85-90% of the CM is actually coming from the Dubai business. So, that's the reality of it. Everything else on a CM is 0. It's the UAE business which is giving the CM. Actually, UAE should not be a New initiative. From a classification perspective, what we should actually do, is UAE should be part of Core, because it is actually Core business, there is no difference there.
What is Hybrid as a percentage of total new business?
Sanketh, it's about 25%. It's been in that range for a while.
On the consistent improvement in CM for the New initiative business - was PoSP CM supposed to be maxed out at 1-2% or 3%? Where is the upside in CM coming from?
You guys all really want the answer, so I'll give you the answer only. The PoSP CM is 1%. So, yes, if we are at 5%, it's coming from other parts. The biggest contributor in that CM; 85-90% of the CM is actually coming from the Dubai business. So, that's the reality of it. Everything else on a CM is 0. It's the UAE business which is giving the CM. Actually, UAE should not be a New initiative. From a classification perspective, what we should actually do, is UAE should be part of Core, because it is actually Core business, there is no difference there. I think we should just separate out PoSP and everything else. Maybe Corporate & PoSP because these Corporate business & PoSP have very different dynamics, and our Core business has very different dynamics. So, if you segregate that out that way, it just might start making a lot more sense, because I really don't see why UAE is in New initiatives. It should actually be in Existing.