Shares of PB Fintech extended their losing streak to a sixth straight session on Thursday, slipping another 9.4% to hit a low of Rs 965. The stock is now down 50% from its record high of Rs 1,963 and has fallen below its 2021 IPO issue price of Rs 980 per share.

The selloff comes after the Insurance Regulatory and Development Authority of India (IRDAI) proposed a ban on 'dark patterns' on insurance websites, including practices that require customers to share personal details before accessing product features and pricing information.

The proposed IRDAI reforms could weigh on insurance stocks by pressuring the economics of distribution. Motilal Oswal analysts say a 20% reduction in employee and advertising costs could limit PB Fintech's earnings impact to around 30%, although the valuation would still remain high at around 57x earnings.

Time to sell PB Fintech shares?

Bernstein, just a few days after projecting 100% upside, has now slashed its target price to Rs 1,085 per share, forecasting a 2% upside from current levels.

The brokerage said lower general insurance take-rates may not be enough to cover current costs. It also expects the POSP business to scale down as the model becomes unviable. Bernstein cut its FY30 net income estimate to Rs 2,000 crore from Rs 3,200 crore, while its FY28 EPS estimate was reduced to Rs 24.44 from Rs 35.49. Its forecasts assume that the proposed commission caps are not rolled back.

The brokerage expects sharp cost control in the core business from FY28 and values the stock at around 25x FY30 EPS. It sees the next 18 months as a critical period, with a wide range of possible outcomes.

Last week, Jefferies also cut its target price to Rs 1,540, forecasting an upside of 44.6% from the last close. The brokerage said PB Fintech indicated that non-life NPV could fall to 33-40% of the original NPV if IRDAI's proposed commission cuts in health and motor insurance are implemented. Life insurance NPV, however, is expected to remain broadly similar to current levels, supported by higher renewal commissions in term insurance.

Jefferies estimates that a 10% cut in new business commission rates could translate into a 10-12% decline in earnings. It said the proposed regulations could have a material adverse impact on near-term earnings if implemented, although the consultation paper could still change after feedback.

The proposed regulations have led to a 48% plunge in PB Fintech shares in just six trading sessions, translating to an m-cap loss of Rs 42,000 crore over the same period.