IPO Analysis: PB Fintech Ltd

IPO Rating: Invest for long-term 

About the issue: 

PB Fintech Ltd is India’s largest online platform for insurance and lending products and operates through two brands Policybazaar and Paisabazaar. The company is coming out with its initial public offering (IPO) of equity shares with a face value of Rs 2 per equity share. The issue size of the company is Rs 5,710 crore, with a fresh issue comprising Rs 3,750 crore while the remaining include the sale of shares worth Rs 1,960 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 940 to Rs 980 per equity share. The IPO opening date is November 1, 2021, while it will close on November 3, 2021. It will be listed on the Exchanges on November 15, 2021. The IPO market lot size is 15 shares. A retail-individual investor can apply up to a maximum of 13 lots (195 shares or Rs 1,91,100).  

The net proceeds generated from the IPO will be utilized towards enhancing visibility and awareness of the company’s brands, including but not limited to “Policybazaar” and “Paisabazaar” - Rs 15,000 million, exploring new opportunities to expand the company’s consumer base including offline presence – Rs 3,750 million, funding strategic investments and acquisitions – Rs 6,000 million, and expanding presence outside India – Rs 3,750 million. 

Policybazaar IPO Details: 

About the company: 

PB Fintech is India's leading online platform for insurance and lending products. The company provides convenient access to insurance, credit, and other financial products and aims to create awareness in India about the financial impact of death, disease, and damage. 

In 2008, PB Fintech launched Policybazaar aimed at catering to consumers who need more information, choice, and transparency in insurance policies. Policybazaar is an online platform for consumers and insurer partners to buy and sell insurance products. 51 insurer partners offered over 340 term, health, motor, home, and travel insurance products on the policy bazaar platform, as of March 2021. 

 Policybazaar offers its users with i) pre-purchase research, ii) purchase, including application, inspection, medical check-up, and payment; and iii) post-purchase policy management, including claims facilitation, renewals, cancellations, and refunds. The company's technology solutions are focused on automation and self-service-driven consumer experiences requiring minimal human intervention. According to Frost & Sullivan, Policybazaar was India's largest digital insurance marketplace with a 93.4 per cent market share based on the number of policies sold in Fiscal 2020. Also, in the same year, 65.3 per cent of all digital insurance sales in India by volume were transacted through Policybazaar. 

PB Fintech also launched Paisabazaar in 2014 intending to provide ease, convenience, and transparency in selecting a variety of personal loans and credit cards for the consumers. The company has partnered with 54 large banks, NBFCs, and fintech lenders offering a wide choice of products to consumers across personal credit categories, including personal loans, business loans, credit cards, home loans, and loans against property. According to Frost & Sullivan, Paisabazaar was India's largest digital consumer credit marketplace with a 51.4 per cent market share, based on disbursals in Fiscal 2020. During Fiscals 2019, 2020, and 2021, Paisabazaar enabled disbursals of Rs 51,015 million, Rs 65,496 million, and Rs 29,168 million, respectively. 

Competitive Strengths: 

Providing a wide choice and transparency to customers to research and select insurance and personal credit products. 

Proprietary Technology helps in superior data intelligence and customer service. 

Collaborative partnership with various companies for insurance and lending products. 

Strong network effects for Policybazaar and Paisabazaar platforms. 

High renewal rates. 

Capital efficient model with low operating costs. 

Experienced Founders and management. 

Company Financials: 

The revenues have grown with a CAGR of 34.55 per cent from FY19 to FY21. However, the company is still a loss-making firm, but the loss has been on a declining trend over the years. 

Recommendation: 

Compared with global peers, India has a highly underpenetrated insurance market. India was amongst the lowest in the world in terms of sum assured as % of GDP in 2020. 

Source: Frost and Sullivan Analysis 

Digital technology has emerged as a new-age solution to increase awareness regarding insurance and finance products. That’s where PB Fintech has a huge role to play. Being a leading industry player, it has a tremendous growth opportunity in both insurance and credit lending segments. The company has a simple and efficient business model and bears no credit risk over insurance products. It has a strong brand value recall and retention of customers. 

Source: Company DRHP 

The fact that PB Fintech is still a loss-making company simply cannot be ignored. However, it has been able to reduce cost as a ratio to revenues from 176 per cent in FY19 to 124 per cent in FY21. Considering the macroeconomic scenario and the growth opportunities it puts forth, we recommend our readers to invest for the long-term in this IPO.