PolicyBazaar’s IPO opens next week. Should you apply?

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After the promoter of Nykaa, FSN E-Commerce Venture ??IPO of $ 53.5 billion, PB Fintech, owner of the online platforms PolicyBazaar and PaisaBazaar, is expected to hit the market next week.

The initial public offering (IPO) of PB Fintech, the parent company of the online insurance aggregator and fintech platform Policybazaar, will open for subscription on November 1, 2021. Individuals will be able to subscribe to the issue public until November 3, 2021.

The price range of the IPO was set at ??940-980 per share. The issue size is 60.1 million shares, with a par value of ??2 each.

Through the public offering, PB Fintech will raise an amount of approximately ??56.3 billion.

PB Fintech, which filed draft documents with the market regulator in August, last week obtained the regulator’s permission to launch the public offering.

The company is the leading online platform for insurance and loan products and provides access to insurance, credit and other financial products.

Kotak Securities, Morgan Stanley, Citigroup Global Markets, ICICI Securities and Jeffries are expected to be the primary managers of the issue. Link Intime is the registrar of the IPO.

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As part of the Offer to Sell (OFS), SoftBank (SVF Python II – Cayman) will sell shares worth ??18.8 billion. SoftBank will sell up to a quarter of the nearly 16% stake it holds in the company.

The founders will also sell shares of approximately ??580 m in IPO.

Reserved portion by category

A total of 10% of the quota is reserved for retail investors, 15% for high net worth individuals (HNI) and the remainder 75% for qualified institutional buyers (QIB).

Retail investors can buy a minimum of 15 shares under a lot for an amount of ??14,700 and a maximum of 13 lots (195 parts) for ??191 100.

Use of IPO funds

The company plans to use ??15 billion of the amount raised to improve the visibility and notoriety of the company’s brands, in particular PolicyBazaar and PaisaBazaar.

He plans to use ??3.8 billion towards new growth initiatives to increase the customer base, including offline presence.

During this time, ??6 billion will be used to finance strategic investments and acquisitions. An additional amount of ??3.8 billion will be devoted to expanding its presence outside the country.

About PB Fintech

PB Fintech is India’s leading online platform for insurance and loan products.

The company provides convenient access to insurance, credit and other financial products and aims to raise awareness in India about the financial impact of death, illness and damage.

In 2008, PB Fintech launched Policybazaar aimed at responding to consumers who need more information, choice and transparency in insurance policies.

Policybazaar is an online platform for consumers and partner insurers to buy and sell insurance products. 51 partner insurers offered more than 340 term, health, auto, home and travel insurance products on the policy bazaar platform in March 2021.

Policybazaar offers its users pre-purchase research, purchasing, including inquiry, inspection, medical examination, and payment and post-purchase policy management, including facilitation of claims, renewals, cancellations and refunds.

The company’s technology solutions focus on automation and self-service-driven consumer experiences that require minimal human intervention.

PB Fintech also launched PaisaBazaar in 2014 with the intention of providing ease, convenience and transparency in the selection of a variety of personal loans and credit cards for consumers.

The company has partnered with 54 major banks, NBFCs and fintech lenders providing a wide choice of products to consumers across all categories of personal credit, including personal loans, business loans, credit cards, home loans and home loans.

Competitive strengths

• Provides wide choice and transparency for customers to search and select insurance and personal credit products.

• Proprietary technology contributes to superior data intelligence and customer service.

• Collaborative partnership with various companies for insurance and credit products.

• Strong network effects for the Policybazaar and PaisaBazaar platforms.

• High renewal rates.

• Capital efficient model with low operating costs.

• Founders with clear objectives supported by experienced management.

• There are no companies listed in India that engage in activity similar to PolicyBazaar.

• The startup is backed by renowned investors such as SoftBank, Temasek and InfoEdge.

Company financial report

The company incurred restated losses of ??1.4 billion, ??2.9 billion, and ??3.5 billion for fiscal years 2021, 2020 and 2019, respectively.

The company expects costs to increase over time and that losses will continue given the expected investments in growing their business.

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In the draft red herring prospectus (DRHP), the company said:

We have spent and plan to continue to devote substantial financial and other resources, among other things, to developing a physical channel and investing in experiments.

These efforts may be more costly than expected and may not result in increased revenue or growth for our business.

Failure to increase our income enough to keep pace with our investments and other expenses could prevent us from achieving or increasing our profitability or positive cash flow on a regular basis.

If we are not able to successfully face these risks and challenges or if we are not able to generate adequate revenue growth and manage our expenses and cash flow, we may continue to incur losses. important in the future and our business, cash flow, financial condition and results of operations could be adversely affected.

Income generation

The company has recorded strong growth in turnover over the past 3 years. Primarily, the business generates income from two sources.

1. PolicyBazaar activity – The company receives an insurance commission from insurance partners and additional services it provides to insurance partners, such as telemarketing and other sales and service related services. after-sales.

2. PaisaBazaar activity – The company receives commission from its lending partners, credit counseling and related services that they provide to consumers and lending partners, and marketing services that they provide to financial service partners, etc. .

Presence of PolicyBazaar

Policybazaar, which started out as a comparison website that generated leads for insurance companies, has grown into a platform that allows users to search, buy, renew, and file claims.

After obtaining an insurance brokerage license, the company expanded its offline presence for distribution.

Offline – The company has already set up 15 physical offices by July 15, 2021 and wishes to develop up to 200 physical points of sale by the end of fiscal year 2024.

These outlets will serve as experience centers for consumers and provide them with the convenience of a local physical presence to help resolve any questions or service requests.

In addition, they will now also be able to provide on-the-ground complaints support to existing and new consumers.

In line – PB Fintech claims to have built India’s largest online platform for insurance and loan products by leveraging the power of technology, data and innovation.

According to Frost & Sullivan, in FY2020, PolicyBazaar was India’s largest

digital insurance market with a 93.4% market share based on the number of policies sold.

Additionally, in FY2020, 65.3% of all digital insurance sales in India by volume were made through PolicyBazaar.

Some risk factors in PB Fintech

• The business has a history of losses and also anticipates increased expenses in the future.

• The Covid-19 pandemic or a similar threat to public health, could negatively affect the activities of the company.

• It operates in dynamic and competitive online fintech industries, making it difficult to predict its future prospects.

• PB Fintech depends on insurance and credit products according to consumer needs. The business can lose business if it cannot continue to attract customers.

• It intends to invest a portion of the proceeds from the IPO to strengthen the brand of both PolicyBazaar and PaisaBazaar. The benefits of these expenses or investments cannot be determined at this stage.

PB Fintech gray market premium

According to market watchers, PolicyBazaar shares are available at a premium (GMP) of ??175 on the gray market today.

The Gray Market is an unofficial platform, on which trading begins after the announcement of the price range from IPO to listing of shares.

What is the ideal IPO strategy to follow?

Over the past few months, a large number of companies have submitted proposals for a floating IPO. A number of IPOs are also expected to hit the market soon.

As companies line up to raise funds in the market against a backdrop of high valuations, there are many factors that investors need to consider before investing their money in an IPO.

If you are investing in an IPO, weigh all the positive and negative factors affecting the business.

Take a close look at the company’s financial statements and valuations. It would give you a clear picture of what’s to come.

Good investment!

This article is syndicated from Equitymaster.com

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