PB Fintech Limited - IPO Note
Finance - Others
PB Fintech Limited - IPO Note
Finance - Others
Stock Info
Shareholding (Pre IPO)
Shareholding (Post IPO)
Strengths
Provides a wide choice of insurance and personal credit products to customers:
PBF provides consumers with a wide choice to research and access insurance and personal
credit products offered by the company’s Insurer and Lending Partners. Through
its Consumer centric approach, PBF created strong brands in both Policybazaar and
Paisabazaar which is recognised throughout India. As per Frost & Sullivan, Policybazaar
is a household name for insurance and is one of the most trusted insurance brands
in India. The strength of the brands are also reflected in the fact that in Fiscal
2021, 83.0% of the policies sold on Policybazaar and 66.0% of loans originated on
Paisabazaar were to Consumers who came to our platform directly or through direct
online brand searches.
Proprietary Technology helps in superior data intelligence and customer service:
PBF’s proprietary technology stack helps it design user-friendly processes
by automating various aspects across the product value chain. Through its technology,
company provides high quality customer services. They also apply voice analytics
and behavioral insights of Consumers, based on their browsing activities, time taken
to fill forms, queries asked and many other activities, enabling them to detect
fraud at the time of purchase and when filing claims. This enables Insurer Partners
to have better risk selection and pricing for insurance products, which has resulted
in significantly higher quality financial and operating results through Policybazaar.
Similarly, Paisabazaar has also been strengthening its infrastructure and capabilities
to facilitate end-to-end digital processes for loans and credit cards. PBF has been
working with its Lending Partners and is deeply focused on digitizing each leg of
the process from application to documentation, income validation, setting up repayment
mandate and e-signing of the agreement. This provides a seamless and convenient
experience to Consumers and brings in efficiency and better turn-around times for
lenders.
Collaborative partnership with various companies for insurance and lending products:
As per Frost & Sullivan, Policybazaar was India’s largest digital insurance
marketplace with a 93.4% market share based on the number of policies sold in Fiscal
2020. Further, in Fiscal 2020, Policybazaar constituted 65.3% of all digital insurance
sales in India by number of policies sold (including online sales done directly
by insurance companies and by insurance distributors). 48 Insurer Partners as of
September 30, 2021 sell their products on Policybazaar, which represents 84.5% of
all licensed insurers in India. Paisabazaar was India's largest consumer credit
marketplace with a 53.7% market share based on disbursals in Fiscal 2021 as per
Frost & Sullivan. Paisabazaar has 56 partnerships with large banks, large NBFCs
and fintech lenders. PBF provides Insurer and Lending Partners with access to the
large Consumer bases of both Policybazaar and Paisabazaar to enhance their sales.
Using its data insights, Insurer and Lending Partners are able to target the right
Consumers for their products. As per Frost & Sullivan, the consumer acquisition
cost for Insurer and Lending Partners is one of the lowest through PBF’s platforms.
PBF also works with its partners to help them create customized products to address
the needs of Consumers and market gaps and better serve their consumers.
High renewal rates provide clear visibility into future business:
Given the nature of many insurance products, such as health and motor insurance
where renewals are common, PBS is able to benefit from long term retention and visibility
of business from existing Consumers. For example, as of March 31, 2021, consumers
who purchased health insurance through Policybazaar in FY14 for the first time have
made repeated health insurance purchases worth 5.9 times the 2014 premium. Similarly,
the multiplier is 3.4 times for motor insurance. This provides clear visibility
into future business outlook as the company is able to generate revenue from a consumer
over a long time period with negligible additional spend towards consumer acquisition
leading to superior unit economics.
Capital efficient model with low operating costs:
PBF aggregates and distributes insurance and personal credit products offered by
insurers and lenders and hence, the company does not carry any corresponding underwriting
or credit risks. Further, as PBF’s brand continues to grow stronger, a larger
percentage of users will use its platform directly or without marketing costs. As
the platform and consumer cohorts continue to develop, PBF expects a larger proportion
of consumers to buy either unassisted or with reduced levels of assistance, which
should increase its capital and operational efficiency.
Risks
- Increase in operating expenses can lead to higher losses: The Company expects costs to increase over time given the investments expected towards growing the business. Any failure to increase revenues sufficiently to keep pace with new investments and other expense could prevent the company from achieving or increasing profitability on a consistent basis.
- Competitive intensity can disrupt the business model: PBF operates in an industry which is relatively new, and business models continue to evolve. The online independent fintech industries in India that Policybazaar and Paisabazaar operate in are intensely competitive, enabled by growing digitization of India. Competitors may introduce platforms with more attractive products, content and features, or services or solutions with competitive pricing or enhanced performance that PBF may not be able to match.
- Withdrawal of insurance & lending products by partners: There is no assurance from Insurer and Lending Partners will continue to offer all of their products and services on PBF’s platforms. Insurer and Lending Partners may withdraw their products, pursuant to regulatory and/ or commercial considerations impacting the financials of the company.
- Insurance broking business is subject to various laws and regulations: PBF derives revenues primarily from commissions and other fees paid by the Insurer and Lending Partners. The commissions that PBF charges to its Insurer Partners are based on charges set forth under the IRDAI Commissions Regulations, 2016. The IRDAI Commission Regulations specifies the maximum remuneration or commission payable to insurance brokers. Any change in regulatory framework can negatively impact the business model of the company
Company Description
PB Fintech (PBF) is India's leading online platform for insurance and lending products. The company provides access to insurance, credit, and other financial products. Policybazaar is an online platform for consumers and insurer partners to buy and sell insurance products. As of September 30, 2021, 48 Insurer Partners offered over 390 term, health, motor, home and travel insurance products on Policybazaar platform. 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 that require minimal human intervention. According to Frost & Sullivan, Policybazaar was India's largest digital insurance marketplace with a 93.4% market share based on the number of policies sold while 65.3% of all digital insurance sales in India by volume were transacted through Policybazaar in FY20.
PB Fintech launched Paisabazaar in 2014 to provide ease, convenience, and transparency in selecting a variety of personal loans and credit cards for the consumers. The company has partnered with 56 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% market share, based on disbursals in FY20.
Valuation
The platforms developed by PBF facilitates consumers to choose financial services products offered by the company’s partners according to their own requirements. The insurance penetration in India is still in its nascent stages and hence, the potential for growth is immense. The improving financial literacy and rising internet penetration would support growth in online insurance and credit platforms. At the upper price band of Rs 980/share, the IPO is valued at 49x FY21 sales. There are no other listed peers of the company. We recommend SUBSCRIBE to the IPO for long term perspective.
Key Information
Use of Proceeds:
The Rs 5,710 crores offer comprises of a fresh issue and an offer for sale. Out
of the fresh issue of Rs 3750 crores, Rs 1500 crores is proposed to be utilized
for enhancing visibility and awareness of company’s brands, including but
not limited to “Policybazaar” and “Paisabazaar”, Rs 375
crores is to be used for identifying new opportunities to expand company’s
consumer base including offline presence, Rs 600 crores for funding strategic investments
and acquisitions, Rs 375 crores for expanding presence outside India and Rs 900
crores for general corporate purposes. The balance Rs 1,960 crores of the issue
would be through offer for sale by the shareholders and proceeds would go to such
selling shareholders.
Book running lead managers:
Kotak Mahindra Capital, Morgan Stanley, Citigroup Global, Icici Securities, HDFC
Bank, IIFL Securities, Jefferies India
Management:
PB Fintech is led by co-founders Yashish Dahiya, Chairman, Executive Director &
CEO, and Alok bansal, Whole-time Director & CFO. Both have a deep understanding
of consumers’ pain points and the structural problems in the insurance and financial
services industry. Policybazaar and Paisabazaar are run by independent management
teams under the leadership of PBF founders. The management team has rich domain
expertise obtained through their experiences in these sectors.
Financial Statement
Profit & Loss Statement:- (Consolidated)
| Yr End March (Rs Cr) | FY19 | FY20 | FY21 |
|---|---|---|---|
| Net Sales | 492.00 | 771.00 | 887.00 |
| Employee Cost | 398.00 | 521.00 | 554.00 |
| Advertising & promotion expenses | 346.00 | 445.00 | 368.00 |
| Network & Internet expenses | 32.00 | 51.00 | 59.00 |
| Other Expenses | 53.00 | 74.00 | 66.00 |
| EBITDA | -337.00 | -320.00 | -160.00 |
| EBITDA Margin | -68.00% | -41.00% | -18.00% |
| Depreciation & Amortization | 30.00 | 47.00 | 41.00 |
| EBIT | -367.00 | -367.00 | -201.00 |
| Other Income | 37.00 | 84.00 | 71.00 |
| Interest & Finance Charges | 8.00 | 12.00 | 12.00 |
| Profit Before Tax - Before Exceptional | -338.00 | -295.00 | -142.00 |
| Tax Expense | 9.00 | 9.00 | 8.00 |
| Net Profit | -347.00 | -304.00 | -150.00 |
| Net Profit Margin | -70.00% | -39.00% | -17.00% |