Policybazaar IPO: What you need to know

By Kirsteen Mackay

Nov 04, 2021

Founded in 2008, Policybazaar is bringing insurance to Indian citizens. And the company is finally getting set to join the public markets on the Bombay stock exchange before the year is out.

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India is a country of 1.3 billion people with a rapidly increasing income range, and insurance is of growing interest as wealth there grows. That's why PB Fintech getting set to IPO is a must-watch stock in the space.

PB Fintech is the parent company of online insurance platform Policybazaar and credit comparison portal Paisabazaar. And it's a leading player in a fast-moving sector.

Founded in 2008, Policybazaar is bringing insurance to Indian citizens. And the company is finally getting set to join the public markets on the Bombay stock exchange before the year is out.

When will the Policybazaar IPO launch?

Policybazaar shares are expected to list on India's leading stock exchanges on November 15, 2021. It will IPO on both NSE India (National Stock Exchange of India Ltd) and the BSE (formerly Bombay Stock Exchange).

Of key note to investors is that there are no publicly-listed companies in India comparable to PB Fintech.

Earlier in the year, Policybazaar was expected to file its draft documents to go public in July. The news sent shares of Info Edge (NSE: NAUKRI) stock soaring because Info Edge is an early investor in Policybazaar. It's also an investor in Zomato (NSE: ZOMATO), which was listed in July. Incidentally, Info Edge stock has risen 27% year-to-date.

From a report on June 22, analysts at Nomura Financial Advisory and Securities (India) said:

“We value Policybazaar at $3.5 billion"

It is now understood the company is aiming for a $5 billion valuation. That equates to 500 Crore in Indian currency.

Is Policybazaar a Chinese company?

Despite confusion that some believe Policybazaar to be a Chinese company, it is not. It is Indian. The company headquarters are in Gurgaon, just outside of New Delhi.

What does PB Fintech do?

PB Fintech has built India's largest online platform for insurance and lending products. The company seized the power of technology, data and innovation to leverage a highly regarded and widely-used insurance platform.

The company provides consumers with convenient access to insurance, credit, and other financial products through its various offerings. It's also doing a great job raising awareness among Indian households about the financial impact of death, disease and damage.

The company doesn't directly create and issue its own insurance policies. It provides shoppers with as many as 50 different insurance products to choose from.

What are the details of the Policybazaar IPO?

PB Fintech took its subscription to the primary market on November 1. The issue received a warm welcome as the long-awaited listing begins to take shape. And by its final day on Wednesday, it was subscribed 16.59 times.

Meanwhile, the Qualified Institutional Buyers (QIBs) category was subscribed 24.89 times, that of non-institutional investors 7.82 times and Retail Individual Investors (RIIs) 3.31 times.

It has set a price band of Rs 940 to Rs 980 per share (between $12 and $13) for the public IPO on November 15.

The firm is looking to list at a valuation north of $5 billion, potentially above $6.15 billion. To do this, it aims to raise above $800 million at IPO.

Recent financial results

During its fiscal year 2021, the company's total income rose by ₹1,018.50 million ($13.67m) from ₹8,555.63 million ($114.85m) in the fiscal year 2020 to ₹9,574.13 million ($128.52m).

This was primarily due to an increase in revenue from operations amounting to ₹1,153.65 million ($15.49m), partially offset by a decrease in other income amounting to ₹135.15 million ($1.81m).

The company lost $40m in 2020, reducing to $20m in 2021. They are losing money in pursuit of long-term growth, and thanks to notable financial backers such as SoftBank and Tencent, this is not overly concerning.

Book runners on the listing include Kotak Investment Banking, Morgan Stanley, Citigroup Global Markets India, ICICI Securities, HDFC Bank, IIFL Securities, Jefferies, and LinkIntime.

$300m of the raise is being allocated to existing investors. This is a bullish signal as it shows insiders are keen to hang on for further growth opportunities.

How will PB Fintech spend the IPO raise?

PB Fintech intends to use money from the raise to help expand its footprint throughout India. Proceeds will also be used to raise visibility and awareness of its brands and increase its online and offline presence. It also plans to fund strategic investments and acquisitions.

The company will receive proceeds from the Fresh Issue, which it will use to expand the business. However, it will not receive any proceeds from the Offer for Sale. This is an extended offer of shares for sale by the selling shareholders. These include SoftBank, PB Fintech’s CEO, and its CFO.

As per the red herring prospectus, SoftBank will be selling shares worth ₹1,875 crore ($250 million). PB Fintech’s chief executive officer (CEO) Yashish Dahiya will be selling shares worth ₹30 crore ($4 million) and the chief financial officer (CFO) Alok Bansal will be selling shares worth ₹12.75 crore ($1.7 million).

Is the Indian insurance market set to grow?

In 2020, India had a ₹7.6 trillion (US$ 102 billion) insurance industry, measured in terms of Total Premium. This industry is expected to grow at a 17.8% CAGR to reach ₹39.0 trillion (US$ 520 billion) by 2030.

As per Frost & Sullivan analysis, the following projections are made:

  • Life insurance to grow at 18.8%

  • Health insurance to grow at 15.3%

  • Non-life insurance to grow at 13.5%

In 2021, India's non-life insurance industry grew by 5.2% to ₹2 trillion, with health, motor and other non-life insurance at ₹0.6 trillion, ₹0.7 trillion and ₹0.7 trillion, respectively, measured in terms of Total Premium. These figures are taken from PB Fintech's Red Herring Prospectus for its pending IPO.

Comparable companies to Policybazaar

Indian unicorn Acko has a similar platform to Policybazaar in India and is one of its key competitors in the country. Then there's Life Insurance Corporation of India (LIC), which sells actual insurance products but is still a competitor. LIC is expected to IPO soon.

Lemonade (NYSE: LMND), an American insurance provider, has a $4.44bn market cap. It offers a wide range of consumer policies, and while it doesn't directly compete with Policybazaar, it can give investors an idea of how the future might look.

What are the risks to investing in PB Fintech?

The Indian insurance industry is in its early growth phase and, as such, faces several challenges.

Policy issuance takes time as documents are still subject to manual processing. And there is a lack of standardization of product features, little assistance for claims filing, and a lack of full transparency in costs.

PB Fintech is playing its part in reducing these issues as introducing standardized products and digitization helps.

One good sign of progress is that the instances of miss-selling insurance products is declining. From over 47.5k complaints in 2018, this reduced to 35.1k complaints in 2020.

In recent years, technology has come into its own in the insurance market, with major insurers and fintech players emerging in the space.

Should you buy shares in PB Fintech?

Bull case

  • Some investors are bullish on the Indian market in general as they see the country on an upward trajectory through strong economic growth. This is the sort of company that will appeal to overseas investors looking to get a piece of the broader Indian economic action.

  • Tech innovations are enabling breakthrough growth in emerging markets. And this is helping PB Fintech increase productivity, improve consumer experience and cut operational costs.

  • Policybazaar has less than 5% market penetration on a 1.3bn population

  • Insurance has proven use cases for emerging markets where affluence is growing.

Bear case

  • The Indian insurance industry is in its early growth phase, fraught with challenges.

  • Geopolitical uncertainty can't guarantee the country will thrive.

  • Company expenses rose during COVID-19. Further lockdowns could exacerbate this.

  • It’s a competitive space.

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Important Notice And Disclaimer

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.