Policybazaar, Backed by SoftBank, Files Draft Prospectus for $ 810 Million IPO
The parent company of online insurance marketplace Policybazaar and lending platform Paisabazaar has filed documents for an initial public offering of INR 60.17 billion ($ 810 million) with Indian market regulator SEBI.
The offer includes a new share issue worth INR 37.50 billion (USD 504 million) and an offer to sell (OFS) by existing investors for INR 22.67 billion (USD 305 million), a the company indicated in the prospect’s draft, which it filed on Monday.
A local media report Economic times said the company is considering a valuation of $ 5 billion to $ 6 billion when it goes public by December. The Gurgaon-based company became the fifth startup after Zomato, Paytm, Mobikwik and CarTrade to start the IPO process.
The 13-year-old company, which has raised more than $ 760 million from investors such as SoftBank, Falcon Edge, Alpha Wave Incubation and Tencent, among others, said it may choose to sell primary shares of a 7.5 billion INR ($ 101 million) value before listing. If that happened, it would reduce its new issue size by the same number of shares.
The OFS for 22.67 billion INR of shares by existing backers includes SoftBank unloading a stake worth 18.7 billion INR (251 million USD) and the co-founder and CEO of the company Yashish Dahiya selling shares for up to INR 2.5 billion (US $ 33.6 million).
Currently, SoftBank, through its two funds SVF India Holdings (Cayman) Limited and SVF Python II (Cayman) Limited, holds a total of 15.76% stake in PB Fintech, while Dahiya holds a 4.27% stake. Interestingly, Tencent, which owns 9.16% in PB Fintech, will not sell any of its shares in the company through OFS, according to the record. Many Chinese investment firms have been looking to exit their Indian portfolios through a secondary sale of shares or an IPO since the Indian government changed the rules on FDI in April 2020. The news rules require Chinese companies to obtain authorization before making any investment in India.
Founded in 2008 by Yashish Dahiya, Alok Bansal and Avaneesh Nirjar, Policybazaar has grown to become the leading player in online insurance over the past decade. As of March 31, Policybazaar had 48 million registered users, who have purchased more than 19 million policies from its insurance partners. According to Frost & Sullivan, in fiscal year 2020, Policybazaar was the largest digital insurance market in India with a 93.4% market share based on the number of policies sold.
In 2014, the founding team of Policybazaar launched Paisabazaar as a subsidiary of the group to offer personal loans by bringing lenders together on a single platform. By FY2020, Paisabazaar had grown into the largest digital lending market with a 51.4% market share, based on disbursements.
In the filing, the company said it generated a premium of INR 27.43 billion ($ 369 million) for its insurance partners through new insurance policies in fiscal year 2021, while Paisabazaar facilitated the disbursement. of INR 29.16 billion ($ 392 million) in loans, which was less than half of what it disbursed in fiscal year 2020, due to the COVID-19 pandemic.
PB Fintech plans to use the proceeds from the new share issue to “enhance the visibility and awareness” of its brands, expand its international business and establish an offline presence.
“We plan to use INR 15 billion (USD 201.8 million) of the net proceeds from the new issue to fund the company’s future marketing initiatives over the next three fiscal years,” the company noted.
Meanwhile, the company intends to use INR 3.75 billion (USD 50.4 million) for its international expansion.
“We have operations in Dubai and we plan to scale up our operations and brand presence in Dubai and the Gulf Cooperation Council region as well as in Southeast Asian countries, by investing in the building a strong brand and developing related technologies and infrastructure. , “It said.
More importantly, the company plans to use the proceeds from the IPO to create and scale footprints offline. In June, Policybazaar received a license from IRDAI, the insurance market regulator, to act as a direct insurance broker (life and damage). Previously, Policybazaar operated only as a web aggregator for insurance products under applicable IRDAI regulations.
“As an insurance broker, we will be able to increase our business and expand our service package, offering it to a wider range of consumers while also interacting with them offline,” said the society.
Policybazaar has already set up 15 physical outlets and aims to increase that number to 200 by the end of fiscal year 2024. It plans to invest INR 3.75 billion (USD 50.4 million) of the net proceeds in its physical expansion initiatives.
“These outlets will serve as experience centers for consumers and… help them resolve any questions or service requests,” the company said. “We will now also be able to provide our existing and new customers with on-the-ground support for complaints. “
PB Fintech added that it will use an additional INR 6 billion (USD 80.7 million) in potential acquisitions and strategic initiatives.
Opportunities and challenges
India’s insurance industry, which was worth INR 7.6 trillion ($ 102 billion) in terms of total premiums in FY2020, is expected to grow at a CAGR of 17.8% to reach 39 trillion INR ($ 520 billion) by fiscal year 2030.
Despite the huge market, India has a very under-penetrated insurance market, relative to its global peers. In terms of sum insured (the total value of insurance policies purchased) as a percentage of GDP in 2020, India was among the lowest in the world. In addition, the online insurance market is strongly under-penetrated with 1% of total premiums sold online in fiscal 2020 compared to 13.3% in the United States and 5.5% in China in 2020.
The digital insurance markets held a 54.3% share of the total online insurance market in fiscal 2020. Policybazaar, the category leader in the segment, expects this share increases in the coming years.
However, the company has yet to become profitable, although over the past year it has halved its losses from INR 3.04 billion ($ 40.9 million) over the past year. fiscal year 2020 to 1.5 billion INR (20.1 million USD) in fiscal year 2021.
“We expect that our costs will increase over time and that our losses will continue given the investments expected to grow our business,” he said on the file. “We plan to continue to devote substantial financial and other resources, among other things, to developing a physical channel and investing in experiments.”
Additionally, the second wave of COVID-19 in India earlier this year and the lockdowns and restrictions that followed reduced demand for travel and other insurance products, as well as loan disbursements on our platforms over the course of the year. last quarter, the company said.
“Due to the detection of new strains and subsequent waves of COVID-19 infections in several states in India as well as various parts of the world, we may be subject to further lockdowns or restrictions. , which can adversely affect our business. operations, ”he added.