Policybazaar IPO gets Subscribe rating from Hem Securities - What broker liked, valuations, risks and more

PB Fintech Ltd. (PBFL), which operates online insurance marketplace “Policybazaar” and credit comparison portal “Paisabazaar” has come up with an IPO to raise around Rs 5,710 cr, which opens on 1st Nov. and closes on 3rd Nov. 2021. Stock broker and investment banker in SME segment in India, Hem Securities has rated Policybazaar IPO as Subscribe.

Hem Securities recommended “Subscribe” on issue for both listing gain and long term purpose.

Policybazaar IPO: VALUATION

Talking about valuation of Policybazaar IPO in its note, Hem Securities said, "Company is bringing the issue at price band of Rs 940-980 per share at p/s multiple of 23x & 17x on FY23E & FY24E. Company have created Consumer-friendly brands offering wide choice, transparency and convenience. Company being collaborative partner for Insurer and Lending Partners has high renewal rates providing clear visibility into future business and delivering superior economics. Company also derives benefits from economies of segmentation with low operating costs and capital requirements. Hence looking after all above, we recommend “Subscribe” on issue for both listing gain & long term purpose." 

Policybazaar IPO: What Hem Securities liked  

In its note on Policybazaar IPO, Hem Securities cites what they liked. "Created strong, Consumer-friendly brands offering wide choice, transparency and convenience. Collaborative partner for Insurer and Lending Partners. High renewal rates providing clear visibility into future business and delivering superior economics."

Policybazaar IPO: RISKS 

"Company have incurred restated losses of ₹1,502.42 million, ₹3,040.29 million and ₹3,468.11 million in Fiscals 2021, 2020 and 2019, respectively, and ₹ 1,108.44 million and ₹ 597.53 million in the three months ended June 30, 2021 and June 30, 2020, respectively. Company expect its costs to increase over time and its losses will continue given the investments expected towards growing its business. Company have expended and expect to continue to expend substantial financial and other resources on, among others, developing a physical channel and investing behind experiments," Hem Securities said about risks in its note on Policybazaar IPO. 

PB Fintech IPO

-Earlier, PB Fintech Ltd had garnered a little over Rs 2,569 crore from anchor investors ahead of its IPO.

-The company has decided to allocate 26,218,079 shares to 155 anchor investors at Rs 980 apiece, aggregating the transaction size to Rs 2,569.37 crore, according to a circular uploaded on BSE website.

-Goldman Sachs, Nomura, BlackRock Global Funds, Morgan Stanley, Canada Pension Plan Investment Board, Fidelity, Abu Dhabhi Investment Authority, ICICI Prudential Mutual Fund (MF), SBI MF, Axis MF and UTI MF are among the anchor investors that have been allocated shares.

-The Rs 5,710-crore IPO comprises a fresh issue of Rs 3,750 crore worth of equity shares and an offer for sale of about Rs 1,960 crore by existing shareholders.

-As part of the OFS, SVF Python II (Cayman) will sell shares worth Rs 1,875 crore, Yashish Dahiya will offload shares worth Rs 30 crore, Alok Bansal will divest shares worth Rs 12.75 crore, Shikha Dahiya will sell shares to the tune of Rs 12.25 crore and Rajendra Singh Kuhar will offload shares worth Rs 3.5 crore.

-In addition, Founder United Trust will sell around 2,67,500 shares and in upper band price it comes to around Rs 26.21 crore. The issue, with a price band of Rs 940-980 a share, will open for public subscription during November 1-3.

-Of the entire issue, 75 per cent will be reserved for qualified institutional buyers, 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.

-Proceeds of the fresh issue will be used towards enhancing visibility and awareness of the company's brands, to look for new opportunities to expand growth initiatives to increase the consumer base including offline presence.

-Also, the proceeds from the IPO will be used for funding strategic investments and acquisitions, expanding presence outside India and general corporate purpose.

PB Fintech

-PB Fintech is the leading online platform for insurance and lending products, leveraging the power of technology, data and innovation.

-It provide convenient access to insurance, credit and other financial products.

-Kotak Mahindra Capital Company,Morgan Stanley India Company, Citigroup Global Markets India, ICICI Securities, HDFC Bank Ltd, IIFL Securities and Jefferies India are the book running lead managers to the issue.