Founded in 2008, by Yashish Dahiya, PolicyBazaar (PB Fintech Ltd.) is the largest online platform for insurance and lending products in India. PolicyBazaar was launched in 2008 to respond to the need for more awareness, choice, and transparency and to create a consumer pulled, a provider-neutral model for insurance distribution. In 2014, PB Fintech Ltd. also launched PaisaBazaar with the objective to transform the personal credit market in India. With the start-up ecosystem being performing well in India and the stock market trading at an all-time high, it is the right time for PolicyBazaar to come up with its Initial Public Offer (IPO). The IPO shall be open for subscription from November 01 to November 03, 2021. If you are confused about whether to apply for this IPO or not, this article may guide you to a sound decision.
PolicyBazaar generates the majority of its revenue from the Insurance sector. In 2014, PolicyBazaar launched PaisaBazaar and diversified into the credit sector which now contributes around 30% of its revenue. Historically, the penetration of insurance among the population of India has been abysmally low. A mere 28% of the Indian adults are covered under some type of life insurance in India as compared to 92% of the USA adult population. Only 34% of Indians are covered under health insurance in India. The Indian insurance sector is projected to grow rapidly. India’s insurance industry was worth $102 Billion as of FY20, which is estimated to grow to $520 Billion by FY30. Thus, the insurance sector’s overall industry growth (CAGR) is expected to be 17.8%. More specifically, life insurance is growing at 18.80% CAGR, health insurance at 15.30% CAGR, and General Insurance at 13.50% CAGR. Companies like PolicyBazaar have huge scope to grow in the industry as the insurance sector remains widely underpenetrated in India. The loan segments like credit cards, personal loans, home loans, business loans, and other kinds of loans are also growing rapidly in India. According to a joint report by ICICI Bank & CRISIL, retail loans are estimated to double up to Rs. 96 trillion, home loans to reach Rs. 46.1 trillion, and personal loans to double to Rs. 46.1 trillion in the next 5 years. Overall, the credit sector in India is expected to grow at a 15% CAGR. With both the insurance and credit sectors projecting strong growth numbers, PolicyBazaar’s future prospect looks quite promising.
PolicyBazaar was incorporated in 2008 as an online platform for consumers and insurer partners to buy and sell insurance products. As of the FY-2021, around 51 insurer partners offered more than 340 insurance products on the online platform of the PolicyBazaar. PolicyBazaar offers a wide range of services to its customers ranging from pre-purchase research to purchase of the policy and post-purchase policy management. PolicyBazaar became the largest digital insurance marketplace in India with a whopping 93.40% market share based on the number of policies sold in the fiscal year 2020. Also, more than 65.30% of the total digital insurance sales in India by volume were transacted through the online platform of the PolicyBazaar. PB Fintech Ltd., the parent company of PolicyBazaar, also launched PaisaBazaar in 2014, which is also an online platform offering a wide variety of personal loans and credit loans to its customers. As of the FY-2021, PaisaBazaar has partnered with over 54 large banks, NBFCs, and fintech lenders. PaisaBazaar also emerged as India’s largest digital consumer credit marketplace with a market share of 51.40% based on disbursals of loans in the Fiscal year 2020. Being the market leader in both digital insurance and digital lending space, PolicyBazaar IPO is very tempting for investors. But before jumping to any conclusion, investors must have a look at the company’s financials.
- Revenue Growth: The revenue of PolicyBazaar is rising over the years. For the year 2021, it generated a revenue of Rs. 957 crores as compared to Rs. 856 crores in 2020. This shows a growth of 11.90% over one year. PolicyBazaar is performing well in its domain and is also looking to expand its revenue through different segments of the economy.
- Profits & Margins: Though the net profit of PolicyBazaar is negative for the past few years, it is showing clear signs of improvement. The net loss of the company was Rs. 150 crores in 2021 as compared to Rs. 304 crores in 2020. This indicates an improvement of over 50%. Profits of the company are expected to further improve in the future due to increased insurance awareness spread by the government in recent times.
- Cash-Flow from Operations: PolicyBazaar is witnessing continuous growth in cash flow from operations. In 2021, it generated positive cash flow for the first time of Rs. 29 crores as opposed to a negative cash flow of Rs. 364 crores for the year 2020.
- Asset Growth: In recent years, there is huge growth in the total assets of PolicyBazaar due to increasing in investments and fixed deposits by the company. The total assets of PolicyBazaar grew from Rs. 1,576 crores in 2020 to Rs. 2,331 crores in 2021, an increase of 47.89% over one year. PolicyBazaar is further expected to increase its assets in the coming years, which is expected to be beneficial in the long term.
|Revenue||Rs. 529 crores||Rs. 856 crores||Rs. 957 crores|
|Profit||(Rs. 347 crores)||(Rs. 304 crores)||(Rs. 150 crores)|
|Total Assets||Rs. 751 crores||Rs. 1,576 crores||Rs. 2,331 crores|
|Cashflow from Operations||(Rs. 282 crores)||(Rs. 364 crores)||Rs. 29 crores|
Details of IPO
|IPO Opening Date||November 01, 2021|
|IPO Closing Date||November 03, 2021|
|Issue Size||Rs. 6017.50 crores|
|Price Band||Rs. 940 – Rs. 980|
|Face Value||Rs. 2 per equity share|
|Market Lot Size||15 (Minimum Investment: Rs. 14,700, & Maximum Investment: Rs. 1,91,100)|
|Issue Type||Book Building Issue|
|Listing At||BSE, NSE|
Important Tentative Timetable:
|IPO Open Date||November 01, 2021|
|IPO Close Date||November 03, 2021|
|Basis Allotment Date||November 10, 2021|
|Initiation of Refund||November 11, 2021|
|Credit of Shares to Demat Account||November 12, 2021|
|IPO Listing Date||November 15, 2021|
Competitive Strength of PolicyBazaar
- PolicyBazaar is India’s largest digital insurance marketplace with a market share of 93.4% based on the number of policies sold in the fiscal year 2020.
- It has a large and efficient network, offering consumers financial products by over 51 insurer partners and 54 lending partners.
- It has high renewal rates which promise superior economics and clear visibility into the future business.
- It has a capital-efficient business model with minimal operating costs.
- It possesses strong and consumer-friendly brands that offer a wide choice and convenience to the customers.
- It operates on proprietary technology that leads to superior data intelligence and customer service.
Risk Factors in the IPO
- Insurance Partners leaving the Platform: The biggest problem that PolicyBazaar is facing is that its insurance partners are leaving its platform. As of FY-2021, it has 51 insurance partners, it does not have any exclusive or binding contracts with these partners. Thus, at any point in time, these partners may choose to leave the platform. Recently, HDFC Ergo and LIC pulled their products from the platform of PolicyBazaar.
- Excessive Financial Regulation: The insurance sector in India is regulated by IRDAI. IRDAI has strict policies and rules in place and thus any mishap by the company may attract a large number of fines from the regulator.
- Cybercrime: Belonging to the insurance and lending sector, PolicyBazaar possesses financial and insurance-related data of its customers. Thus, PolicyBazaar faces the risk of failure to protect confidential information, prevent cyber-attacks and data breaches.
- History of losses: PolicyBazaar has been continuously suffering from losses year after year. It has a history of losses and anticipates an increase in expenses in the future. These factors have led to an increase in the risk for the investors putting money in the PolicyBazaar IPO.
Based on the history of PolicyBazaar, its growth prospects, and where the entire insurance and credit industry is headed in India, PolicyBazaar looks like a promising investment option. Though it suffers from certain risks and limitations, the future looks brighter for this company. PolicyBazaar plans to foray into international locations along with offline segments, which marks a major milestone for the company. What PolicyBazaar has achieved so far is just a fraction of what it is capable of achieving in the future. Also, PolicyBazaar IPO is coming during the bull run in the stock market, thus investors should consider subscribing to its IPO.