IPO update: PB Fintech

PB Fintech came out with its IPO five months ago. You can find our detailed analysis of the issue. In this update, we are going to look at how the company has performed in the market since its listing and its latest financial performance.

Our analysis of the IPO
PB Fintech has the largest online platforms for insurance and various lending products. The company is famously known for its two flagship brands: 'Policybazaar' under which the company sells various insurance products, and 'Paisabazaar' under which it sells various lending products. In FY21, Policybazaar and Paisabazaar contributed 68.5 per cent and 31.5 per cent of the company's revenue respectively. Based on the company's leadership in the online space, its asset-light model and its partnership with various insurance companies, banks and NBFCs, we gave the company a score of 17 out of 26. A few major concerns we had were its recurring losses, continuous negative operating cash flow and revenue concentration with its top four partners.

Our rating for PB Fintech was based on the following factors:

• Out of 11 business-related metrics, the company did well only on five.
• Out of six management metrics, the company did well on all of them.
• Out of eight financial metrics, it did well on six.
• On the single valuation metric, it did not do well.

Stock performance since listing
PB Fintech's brand status gained attention from all segments of the market. The issue was subscribed 16.6 times overall. The institutional portion was subscribed 24.9 times, the high net worth individuals portion was subscribed 7.8 times, and the retail portion was subscribed 3.3 times.

Thanks to this reception, the company listed at Rs 1,150, 17.3 per cent over its issue price of Rs 980. But this did not sustain long as the shares started to fall immediately. Although overall market conditions also influenced the fall, there was an insider sale which accelerated the fall. The company's CEO and Executive Director Ashish Dahiya, and the company's CFO and whole-time Director Alok Bansal sold 6.1 million shares. The share currently trades at Rs 749.6, 34.8 per cent down from its list price.

Business performance
PB Fintech posted encouraging revenue numbers during the quarter as it increased by a massive 73.2 per cent YoY. Insurance premium and credit disbursals during the period had strong growth of 68 and 94 per cent respectively. But a massive increase in employee benefit expenses and advertising/promotional expenses increased by 212 and 200 per cent YoY respectively. This also resulted in a widening of loss from Rs 20 crore in Q3FY21 to Rs 298 crore in Q3FY22.

For the nine months ended FY22, revenue increased by 43.6 per cent YoY and loss expanded by a massive 614.3 per cent, once again due to an increase in employee benefit expenses and advertising/promotional expenses. During this period, insurance premiums and credit disbursals grew by 38 and 169 per cent YoY respectively.

PB Fintech acquired 24.9 per cent stake in MyLoanCare Ventures in December 2021. This company received an NBFC license from RBI in September 2021. Both existing and new initiatives are auguring well for the company. Recently the life insurance giant LIC tied up with Policybazaar to sell its products online which would be a win for both entities.

What to do now?
PB Fintech's leadership has attracted many investors and analysts because they are the largest and fastest-growing online insurance aggregator in India. We can see their massive growth even on a quarterly basis. As insurance and online lending is still underpenetrated, the company has a large market to expand and cater to. But that said, it is also important for the company to not only post profits but also not burn cash on a regular basis.

Due to its loss-making nature, the company does not have a price-to-earnings, and it currently trades at a price-to-book value of 4.6 times. Investors can keep an eye out for the company, especially on its cash from operations. It is also important that investors do their due diligence on the management and understand the business model before considering investing.

Disclaimer: This analysis is not meant to serve as a recommendation. Do your research before investing in the company. If you are interested in our stock recommendations, please visit Value Research Stock Advisor.

Also read: PB Fintech IPO: Information analysis

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