PB Fintech Policybazaar IPO - Information Note

5paisa Research Team 5paisa Research Team 10th December 2022 - 04:12 pm

PB Fintech Ltd (Policybazaar and Paisabazaar) IPO Note

PB Fintech, the company that owns powerful digital brands like Policybazaar.com and Paisabazaar.com. Policybazaar IPO is opening on 01-November.

While PB Fintech launched Policybazaar way back in 2008, the launch of Paisabazaar was more recent in 2014. The company is looking at the IPO to augment its digital reach and for inorganic growth.

Among the two key properties of PB Fintech, Policybazaar offers an agnostic market place for insurance products.

Individuals can research various insurance policies, compare them on specified parameters, check out originators and also close the sale with the help of screeners.

Paisabazaar, on the other hand, is a credit and loan syndicator for customers with a digital algorithm based on credit score and past payment records.

Key terms of the PB Fintech (Policybazaar and Paisabazaar) IPO

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	01-Nov-2021
Face value of share	Rs.2 per share	Issue Closes on	03-Nov-2021
IPO Price Band	Rs.940 - Rs.980	Basis of Allotment date	10-Nov-2021
Market Lot	15 shares	Refund Initiation date	11-Nov-2021
Retail Investment limit	13 Lots (195 shares)	Credit to Demat	12-Nov-2021
Retail limit - Value	Rs.191,100	IPO Listing date	15-Nov-2021
Fresh Issue Size	Rs.3,750.00 crore	Pre issue promoter stake	N.A.
Offer for Sale Size	Rs.1,875.00 crore	Post issue promoters	N.A.
Total IPO Size	Rs.5,625.00 crore	Indicative valuation	Rs.44,051 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	75%	Retail Quota	10%

_{Data Source: IPO Filings}

Here are some of the key points about the PB Fintech business model

1. As of Mar-21, Policybazaar has 4.80 crore registered customers and has sold over 1.90 crore policies digitally

2. In the financial year FY21 alone, the total number of visits on the Policybazaar website stood at 12.65 crore making the property extremely valuable

3. While Policybazaar has a 90% share of the digital insurance market, Paisabazaar has 51% of the digital consumer credit market place

4. Between them, Policybazaar and Paisabazaar have 51 insurance partners and 54 lending partners, opening up vistas for cross selling

5. The model is capital light, efficient and being digital, it is substantially scalable in a short span of time

6. The Indian insurance opportunity in terms of premium amount is expected to grow from $100 billion to $500 billion by 2030. As of now digital is just 1% of insurance sales, opening a world of opportunity for Policybazaar.

Check: 7 Things to know about Policybazaar IPO

Structure of the PB Fintech (Policybazaar and Paisabazaar) IPO

The IPO will be a combination of a fresh issue and an offer for sale. Here is a gist of the IPO offer of the company.

1. The fresh issue component will entail the issue of 3.826 crore shares and at the peak price band of Rs.980 per share, the fresh issue amount will be Rs.3,750 crore.

2. The OFS component will comprise of the issue of 1.913 crore shares and at the peak price band of Rs.980, the OFS value would be Rs.1,875 crore resulting in a total IPO issue size of Rs.5,625 crore.

3. While Softbank of Japan, an early backer of PB Fintech, will be the biggest seller in the OFS, the promoter family consisting of Yashish Dahiya and Shikha Dahiya will also be participating in the OFS.

At the upper end of the price band, PB Fintech with its combined properties of Policybazaar and Paisabazaar will be valued at Rs.44,051 crore.

Financials of PB Fintech (Policybazaar and Paisabazaar)

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.957.41 cr	Rs.855.56 cr	Rs.528.81 cr
Net Profit	Rs.-150.24 cr	Rs.-304.03 cr	Rs.-346.81 cr
Total Assets	Rs.2,330.73 cr	Rs.1576.00 cr	Rs.751.45 cr

_{Data Source: Company RHP}

Like most of the digital plays, there is a lot of front ending of spending and investments in the case of PB Fintech, which means it still makes losses. However, the losses have been narrowing and in the last one year alone the losses have narrowed from Rs.304 crore to Rs.150 crore.

It is expected that as the publicity and advertisement spend peaks out and as the IPO funds are used for expansion, the profits would gradually begin to show up.

The company plans to use the IPO funds for enhancing visibility of the brands to the extent of Rs.1,500 crore. In addition, it would spend Rs.600 crore on inorganic acquisitions, Rs.375 crore on customer expansion and another Rs.375 crore on international forays.

Investment Perspective for PB Fintech (Policybazaar and Paisabazaar)

In the case of PB Fintech, it is more about the huge digital opportunity considering that India is underpenetrated both with respect to insurance share and digital share.

a) It has the backing of marquee investors like Temasek, Softbank and Info Edge; all known for picking digital winners early.

b) The 5-fold growth in insurance premium penetration and the mere 1% digital penetration are the two big opportunities for PB Fintech.

c) Traditional valuation metrics will not work in this case as the company makes losses at a net level. The justification for the market valuation has to come from the potential of the business and its scalability. On both the counts, there is little doubt.

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