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Policybazaar IPO  Fundamental Analysis

Key Business Highlights of PB Fintech

  • PB Fintech is the holding company for online insurance distributors, Policybazar, and loan portal, Paisabazar.
  • PB Fintech has an asset-light capital strategy and does not underwrite any insurance or retain any credit risk in the books.
  • Policybazaar offers an information-rich, user-friendly, and tech-driven self-service platform for 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.
  • Paisabazaar is an independent digital lending platform that enables consumers to compare, choose and apply for personal credit products. Paisabazar platform has built 54 partnerships with large banks, NBFCs, and fintech lenders who offer a wide choice of product offerings on the platform across personal credit categories, including personal loans, business loans, credit cards, home loans, and loans against property.
  • The Policybazaar platform had over 126.5 million visits in FY21 and 27.0 million visits in Q1FY22.
  • Over 51.1 million consumers registered on the Policybazaar platform as of Q1FY22 ; 9.6 million unique consumers purchased over 19 million policies from PB’s Insurer Partners in FY21.
  • Paisabazaar platform is widely used to access credit scores, approx. 22.5 million Consumers have accessed their credit score through the Paisabazaar platform as of June 30, 2021.

Revenue model of PB Fintech

For Policybazaar, revenue is generated from 

  1. Insurance commission received from Insurer Partners based on a percentage of the premiums originated (includes new as well as renewals) for the Insurer Partners,
  2. Additional services are provided to Insurer Partners like post-sales services, account management, premium collection, and others. 

For Paisabazar, revenue is generated from the following;

  1. The commission received from Lending Partners based on a percentage of the loan disbursal amount or a fixed fee in case of credit cards.
  2. Fees for credit advisory and related services that provided to Consumers or Lending Partners.
  3. Fee-based on the type of marketing services provided to financial services partners.

PB Fintech IPO Financial Analysis

The total revenue of PB Fintech increased by 11.90% to Rs 957.41 crore in FY21 from Rs 855.56 crore in FY20. This increase was due to an increase in 15% revenue from the insurance business but the increase was partially offset by a decrease in the revenue from Paisabazaar due to the pandemic. Total revenues for Q1FY22 were Rs 258.17 crore. The losses were reduced to Rs (150.24) crore in FY21 from Rs (304.03) crore in FY20.

The Issuer is still to turn profitable through its unit economics contribution increased from 8.6% in Fiscal 2019 to 39.8% in Fiscal 2021 and from 28.2% in the three months ended June 30, 2020, to 28.6% in the three months ended June 30, 2021.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title Q1FY22 FY2021 FY2020 FY2019
Total Revenue 258.17 957.41 855.56 528.81
Other income 20.44 70.75 84.27 36.56
PAT (110.84) (150.24) (304.03) (346.81)
EBITDA (97.91) (89.01) (235.62) (299.54)
Total Assets 2278.91 2330.73 1575.99 751.45

Valuation and Peer Comparison

Due to the losses and the negative EPS, the valuation of PB Fintech cannot be ascertained. EPS as at the end of FY21 and Q1FY22 is (4.11) and (2.91) respectively. Price to book value is 19.14x at NAV of Rs 51.19 as on Q1FY22 calculated at the upper price band of Rs 980 per share.

There are no listed peers of the company as per the RHP. However, Paisabazar may face competition from some unlisted peers in the market.

Sector Outlook

Looking at the sector, India has a highly underpenetrated insurance market. India was amongst the lowest in the world in terms of sum assured as a percentage of GDP in FY2021. India’s mortality protection gap as a percentage of protection was at 83.0% in 2019, one of the highest in the world.

The industry is expected to grow at a 17.8% CAGR to reach Rs39.0 trillion (US$ 520 billion) by FY2030, with life, health, and other general insurance growing at 18.8%, 15.3%, and 13.5% CAGR respectively.

India’s health expenditure was amongst the lowest globally at Rs 5.5 thousand (US$73) per capita, compared with Rs 83.3 thousand (US$1,111) per capita in the USA and Rs 37.6 thousand (US$501) per capita in China. Additionally, 63.0% of the healthcare expenditure in India was funded out of pocket in 2018, with only 10.0% getting financed through health insurance. Hence the sector has a huge market opportunity that needs to be tapped.

Conclusion and Investment Strategy

Both the platforms have large, efficient, and intelligent networks facilitating consumers to browse financial services products offered by 51 Insurer Partners and 54 Lending Partners. Policybazar benefits from powerful network effects at scale as a result of its positioning as a trusted and default search engine for insurance and personal credit products in India

The Issuer has a 93.4% market share based on the number of policies sold and 65.3% of digital insurance sales in India by volume was transacted through Policybazar (FY20). The platform has generated strong organic traffic and retention; it provides a comparison of a wide range of insurance products to arrive at an informed decision. Hence an investor may invest both for listing gains and long term as well.

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Review By CA Priyanka Choudhary on 17th Oct 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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