Policybazaar IPO opens: Pricey valuation, loss-making company; should you subscribe or stay away from issue?

By: |
November 01, 2021 12:37 PM

Policybazaar parent company PB Fintech’s Rs 5,625-crore IPO has opened for subscription on Monday, 1 November 2021.

PolicyBazaar IPO,There are no listed companies in India whose business is comparable with that of Policybazaar's business

Policybazaar parent company PB Fintech’s Rs 5,625-crore IPO opened for subscription on Monday, 1 November 2021. The public issue comprises a fresh issue of equity shares worth Rs 3,750 crore, and offer-for-sale (OFS) of Rs 1,875 crore by existing shareholders of the company. In the primary market, Policybazaar shares were trading with a premium of Rs 150 over the upper end of the issue price of Rs 980 apiece, according to the people who deal in unlisted shares of the company. Market watchers say that PB Fintech has come up with its IPO when the traction for unicorns and startups is at its peak. PB Fintech is the leading online platform for insurance and lending products, leveraging the power of technology, data, and innovation.

Insurance penetration is in its nascent stage and with an increase in financial literacy and supportive laws for vehicle insurance, companies like PB Fintech will remain in focus as they are well placed into the segment, said an analyst. “However, going further we may see competition intensifying in space. The company has narrowed its losses and profitability does not seem much far. However, at the upper band of Rs 980, the issue looks highly priced at 44x price to sales,” Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online. Doshi also added that the attraction for startup IPOs may lead to a good subscription and this may emanate 15-20% listing gains, but “for long term we need to be watchful on further performance and take decisions accordingly”, he said.

Policybazaar IPO: Pricey valuations?

Policybazaar is loss-making and being a fintech, valuations also make no sense, Aditya Kondawar, COO, JST Investments, told Financial Express Online. At the upper band of Rs 980, the company is demanding a market cap of Rs 44,041 crore post listing. “As per FY22A sales, the company is demanding 44x Price to sales, which is very expensive,” he added. Since the insurance penetration is low in India, online is even very less and the scope for such aggregators/online brokers is huge. “But many are entering the space and creating their own ecosystem of financial services. Brokerages are creating platform companies with all services inside, fintech too are entering and insurance creators i.e life and general insurance companies are taking the tech route themselves and they are in no rush as agents are accounting for a good share of the business,” Kondawar said. HDFC Ergo and ICICI Lombard have already logged out of PolicyBazaar. “Keeping in mind all of this, we have an ‘avoid’ rating on the IPO. We would like to monitor this space for more time before taking up any action,” he advised.

Policybazaar IPO: Loss-making company

There are no listed companies in India whose business is comparable with that of the company’s business. Marwadi Shares and Finance, which has an avoid rating over the issue as valuations are demanding for a loss-making company, said considering the TTM as of June 2021, sales of Rs 949.37 crore on a post-issue basis, the company is going to list at a market cap/sales of Rs 46.40 with a market cap of Rs 44,051 crore.

Analysts say as the company is not profitable, valuing it on the basis of P/E is not possible. At the higher end of the price band, the issue is aggressively priced at 45 times Price/ Sales (based on FY22 annualised sales). “However, given a fancy for novel tech-based startups, the issue could enjoy premium valuation. Given the euphoria for this issue, the shares had been trading in the range of Rs 2,100- Rs 2,300 in the unlisted market last week. Investors with a higher risk-appetite looking to take exposure to a niche tech-based platform should consider investing in the issue,” INDmoney said in a report.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. Financial Express Online does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Gemini Edibles, Data Patterns, MapMyIndia among 10 cos to get Sebi’s go ahead to float IPOs
2Rakesh Jhunjhunwala-backed Star Health IPO opens tomorrow; GMP evaporates, should you subscribe?
3Two IPOs to hit market next week to raise Rs 7,868 crore