PolicyBazaar IPO: Is it worth investing?

Picture this, you’re on a really long drive, like a retro orange sunset and the wind in your hair… Now before these winds pick you up and whisks you away, pump your brakes, and let’s get a bit into the nitty-gritty of this drive. Shift your attention a little to the ride you’re on. Wonder how you bought it or what if you just so happened to bump too hard into something?

Now that we’ve got your mental gears turning, we’d like to divert your attention to PB Fintech, for they’ve got the solutions to all of these questions. Paisabazaar & Policybazaar are two online giants made by PB Fintech that will fulfil all your credit and insurance needs.

With an organisation as cool as this bringing their IPO, here’s what we think you need to know about it.

Insurance Industry Overview

India’s insurance industry was a whopping ₹ 5.7 trillion in FY20! Yet the Indian insurance market is grossly underpenetrated, with the sum assured as a part of the GDP being only 25%, trailing behind China’s 95% and the USA’s 265%.

It is, however, expected to grow at a CAGR of 18.8% to reach ₹ 39.0 trillion by FY2030 as a result of factors such as positive economic indicators, regulatory push, and greater awareness towards health as a result of the ongoing pandemic.

The personal credit market consisted of ₹ 36.0 trillion in outstanding credit as of FY2021. With India’s 18.2%, it’s still behind compared to the USA’s 79.2% and China’s 55.6% in terms of outstanding consumer debt as a percentage of nominal GDP.

These figures, however, are expected to grow by a CAGR of 9.0% to an outstanding balance of ₹78.1 trillion by FY2030, the reason being an improvement in consumer’s financial literacy, the evolution of consumer behaviour to avail credit to fund regular expenses, favourable regulatory push, etc.

Now, with the bird’s eye view out of the way, let’s look at the company itself and its pieces in these industries.

Company Overview

Born under the wing of Mr. Yashish Dahiya on 4th June 2008, PB Fintech Pvt. Ltd. was later reformed as PB Fintech Limited on 30th June 2021 because it decided to bring its IPO to the people. It will be open for public subscription from 1st November 2021.

While advantageous to own, the demerits of not owning insurance are still unknown to the majority of Indian populace, giving it only ~3% prenetration in the life insurance field and less than 30% penetration of health insurance. The ease of access afforded by PolicyBazaar's online interface has helped turn this from a 'push' product to a 'pull' product.

PB Fintech built India’s largest online platform for insurance and lending products leveraging the power of technology, data, and innovation.

The company prides itself on a few offsprings - PolicyBazaar & Paisabazaar taking the lead among other siblings based in IT services, Medical services, etc. While PolicyBazaar is only an insurance service, Paisabazaar follows the same model but for consumer credit prospects.

Wish for in-depth information on the company’s business model to understand what’s beyond the obvious in PolicyBazaar’s IPO? Visit the Investment Insights section in the Dashboard after signing up to Recipe and read the free report- Can PolicyBazaar win the massive Insurance bazaar?

With the qualitatives of the company out of the way, let’s get into the quantifiables as we dive into the company’s financials.

Financials of the Company

Although PB Fintech boasts a healthy growth in total assets and total revenue, the profit after tax leaves a lot to be desired as the company seems to be making losses year after yearly. To make matters precarious, the company projects the possibility of an increase in expenses as the business grows. On the bright side, however, the company seems to be slowly reducing the losses it incurs to keep it out of the red zone.

Now that the company’s output numbers are crunched let’s dive into the details of the upcoming IPO.

PolicyBazaar IPO Details

This is what the company wants. Here’s why they want it. Moving forward, let’s discuss the reasons for coming up with the IPO.

Objectives of the IPO

PB Fintech aims to utilise the funds acquired from this IPO to fulfill the following goals:

• Enhancing the visibility and awareness of the brands associated with PB Fintech without being limited to PolicyBazaar and Paisabazaar through advertising, awareness initiatives, and engagement with marketing agencies as means to do so.

• Prior to achieving the IRDAI registration as a direct insurance broker, PolicyBazaar could only function as a web aggregator. Post-registration, the acquisition PolicyBazaar can make new headway into insurance broking. Thanks to this newfound leg-room, it intends to spread its engagements offline as well!

• To make strategic investments and acquisitions that are complementary to the existing business and would help its growth and scaling as well as improve the quality of the products and services it provides.

• PB Fintech intends to leave a footprint on international grounds by bolstering its subsidiary PB Fintech FZ LLC, based in Dubai, and establishing new units in the Middle East and Southeast Asia.

• Any balance, after the purposes mentioned above, would go to serve general corporate purposes.

That’s a lot of information about the company, now let’s look into the good, the bad, don’t think there’s any ugly.

PB Fintech IPO: The Plusses

• Being an early entrant in the “online monetary instrument website” market, Policybazaar has gained ground against competition due to its lack in the establishment phase.

• Stemming from the benefits of an early entrance, all of PB’s presence has been able to mine a precious resource in the online field, DATA. For the web-based instruments market, information on consumer behavior and trends has as rocket fuel to the fire of their success.

• Although it has grown since the “aggregator” phase, both PolicyBazaar and Paisabazaar act as a junction to provide users one-stop access to some of the biggest players in both the insurance and consumer credit market.

• PB has significant market shares, as per Frost and Sullivan (an independent business consulting firm), in FY 2020. Policybazaar was India’s largest digital insurance marketplace among all online insurance distributors, with a 93.4% market share based on the number of policies sold. Likewise, based on disbursals, Paisabazaar was India’s largest digital consumer credit marketplace with a 51.4% market share.

• With the advent of the Covid-19 pandemic, people have become more aware of the risks to their health and have shown improved interest in insurance and better healthcare spending. Better financial education and literacy have also increased people’s tendency to access personal credit to fund immediate needs.

The Risks behind the mitigator

• Since it functions as a catalogue website for multiple insurance companies, it works in tandem with various service providers and depends on their continued partnership for the sustenance of business. Recently, however, some major players have retracted their services from the website. If the trend continues, the future could look bleak for the insurance selling unit.

• Although the losses are diminishing, the company seems to be suffering repeated bouts of them, with an upcoming growth of business only gearing up to increase the expenses that it incurs.

• Being based majorly online, risks of IT failure, data security are ever-present and need constant monitoring to keep tided over.

• While the Covid-19 outbreak had a positive impact from an awareness point of view, the lockdowns on travel did make the business hit a few speed bumps due to the inability to function on limited grounds.

The Bottom Line

With its earnest and humble beginnings, PB Fintech, the creator of PolicyBazaar, Paisabazaar, and then some, has grown to be a market leader and now intends to grow out of its existing chrysalis to be something more. Driven by the urge to keep their customers educated and informed, the company seems ready to put its head in the game, buckle down, and get busy.

So what do you think? Are you willing to get on this ride and go to town? Or will you take a chill pill and watch as the play unfolds? Let us know in the comments section below.

*Disclaimer: The stock discussed above aren't recommendations from Finology, they are only picked to make you understand the concept.