PB Fintech - Another Platform Play

Updated: Feb 15


Company Name – PB Fintech Limited (PB Fintech)


Current Share Price – INR 1,120 (December 15, 2021)


Market Cap – INR 50,409 cr


 

1. What is interesting about the stock?

PB Fintech has 2 leading platforms under it: PolicyBazaar and PaisaBazaar. PolicyBazaar, launched in 2008, is India's leading online platform for insurance and lending products. It provides convenient access to insurance, credit, and other financial products. After receiving the insurance broking license from IRDAI, it is in the process of creating an offline presence also. PaisaBazaar, launched in 2014, is the financial advisory platform from the same company.


Insurance is a long-term growth story in India, as there are growth prospects both in terms of penetration (number of people covered – world average is 2.8x that of India) as well as the insurance protection gap (coverage per person – US average is 5x that of India). It is primarily a “push” product and hence, the distributor is a critical part of the industry. This has led to the growth of third-party as well as direct salesforce, in both the online and offline modes.


The GoI’s push towards digitization has helped the 2 platforms grow exponentially, and PolicyBazaar has a 90+% market share of the fast-growing online insurance distribution space. But with increased competition from super-app aspirants like Paytm and Jio and other aggressive players like Coverfox, it is likely to face tough times.


PaisaBazaar is India’s largest digital consumer credit marketplace with a ~50% market share, based on disbursals. It has partnered with 50+ large banks, NBFCs and fintech lenders to offer personal credit products like loans and credit cards. It also offers free access to credit scores in partnership with all the 4 credit bureaus in India.


The Company has lost money since inception and has been funded through capital raises from marquee international investors (USD 366 million across 7 rounds) prior to the IPO. Though the losses have been coming down, the offline expansion could result in deteriorating financial metrics.


Why invest in PB Fintech?


The key investment arguments summarized would be:

  • 90+% market share in a fast-growing online insurance distribution market with high brand recall for PolicyBazaar

  • 50+% market share in digital consumer credit marketplace and the only profitable platform in PaisaBazaar

  • Moving to an omni-channel presence through the establishment of physical branches apart from web and mobile app presence

  • Experienced management team

2. Key Historical Financials


3. What is my view on company valuation?


The Company has seen a good debut on the stock markets with a 16.6x oversubscription and 17% listing premium. After reaching a peak of INR 1,470, the share price has been correcting but is still above the offer price to INR 980.


At a price of INR 1,120 per share, the trailing P/B ratio is ~25x, Price/Revenues ratio of ~60x, very expensive in any market. While the platform businesses are attractive, the fundamentals will take time to catch up.


4. What are the risks to the investment analysis?


Risks to the analysis are:

  • Competition intensifies and takes away customers from the Company’s platform through aggressive practices

  • Insurers see good growth in their own websites and therefore, leave third-party sites like PolicyBazaar

  • The physical sales channel is highly competitive and needs a different set of skills from online sales. PolicyBazaar might not be able to transition effectively

 

About the Author


I have over 16 years of experience in private equity and public markets. I am an engineer by background and MBA from a premier institute in India.


Disclosure


I have no stock, option or similar derivative position in any of the companies mentioned since last 30 days, and shall not initiate any such positions within the next 5 days. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from SocInvest). I have no business relationship with any company whose stock is mentioned in this article.


I am not a SEBI registered advisor. This article is purely for educational purpose and not to be construed as an investment advice. Please consult your financial advisor before acting on it.


I have used publicly available information while writing this article.


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