PB Fintech IPO: Seek for medium term investment

PB Fintech IPO: PB Fintech Ltd the holding company for Policy Bazaar is tapping the capital markets with its fresh issue of Rs 3,750 crores and an offer for sale of Rs 1,933.50 crores and an offer for sale of 2,67,500 shares. The price band is Rs940-980 and at the top end of the price band the issue would garner Rs 5,709.71 crores. The issue opens on Monday (November 1) and closes on Wednesday (November 3). The company allotted shares to anchor investors on Friday and the list is impressive with about 11 Indian companies from the insurance ecosystem investing. They have been allotted a total of just under 11 per cent of the anchor book.

The company has reduced its losses over the last three-year period ending in March 2021 with revenues rising. The revenues in March 2019 were at Rs 528.80 crore followed by Rs 855.56 crore in March 20 and Rs957.41 crore in March 21. Net losses for the respective years fell from Rs 346.81 crores to Rs 304 crores and finally to Rs 150 crores. The company has two broad verticals known as Policy Bazaar and Paisa Bazaar. As the names imply the first is in the insurance space where it provides policies for vehicles, health and life and also savings and pension products. The Paisa Bazaar vertical offers unsecured loans, credit cards, secured loans, credit score and credit advisory services.

In insurance business, the company has sold policies with a sum assured of seven lakh crores and earned a premium of Rs 4,701 crores partnering with 48 partner issuers. The key element in this is the fact that 82.1 per cent of premium was sourced for partners from people or customers who came direct to the platform. The company has partnerships with 56 large banks, NBFC's and fintech's in India. Loans disbursed in FY 2020 were to the tune of 6,550 crores. The website offers free credit score to customers which attracts customers. Once website is visited there is enough to catch the eye and convert the visitor into a customer.

Auto insurance in the country suffers from the double whammy of low value of vehicles, with the largest population of vehicles being low end and also the reluctance to even have the vehicles insured. Its only now that there is a conscience effort being made to force insurance being taken. Further the number of players is constantly increasing and recently the largest proposed and announced IPO was also given permission to sell insurance. Not saying that this would not remain a growing business, but the key elements would be in selling life insurance and related investment pension products and also partially term insurance.

I believe the object of the issue spells out this point where it mentions "new opportunities to expand our customer base including our offline presence". This is a strong statement and reflects the urgent need by the company to have a better reach to the customer where it would involve reaching the customer through a call centre or in person visit to sell a product of life insurance as this is a push product and health insurance is partially of both. Competition in these two segments as of now is not much as the traditional life insurance policy was sold by a friend or a friend's friend and so on and we all initially went to just LIC until privatisation happened about 15-16 years ago. With LIC privatising shortly by going public, things would change and throw open the opportunity to many more people.

There is a grey market price about this issue which is in the region of about 15-20 per cent of the issue price. Such rates are most unpredictable as they have the possibility of changing sharply in either direction. In case one decides to apply for the issue in which the retail portion is 10 per cent of the issue price and is likely to be oversubscribed in the region of five times to maybe seven times or even higher. Not getting shares even on a lottery may not be the best thing when the spate of issues happening in a bunch is already spoiling you for choice. Apply for the medium term and if you are lucky to get allotted shares take a call on what to do if you get a good listing pop.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)