PB Fintech
PB Fintech is coming out with a 100% book building; initial public offering (IPO) of 6,07,30,265 shares of Rs 2 each in a price band Rs 940-980 per equity share.
At least 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
The issue will open for subscription on November 01, 2021 and will close on November 03, 2021.
The shares will be listed on BSE as well as NSE.
The face value of the share is Rs 2 and is priced 470 times of its face value on the lower side and 490 times on the higher side.
Book running lead manager to the issue are Kotak Mahindra Capital Company, Morgan Stanley India Company, Citigroup Global Markets India, ICICI Securities, HDFC Bank, IIFL Securities and Jefferies India.
Compliance Officer for the issue is Bhasker Joshi.
Profile of the company
The company has built India’s largest online platform for insurance and lending products leveraging the power of technology, data and innovation. It provides convenient access to insurance, credit and other financial products and aim to create awareness amongst Indian households about the financial impact of death, disease and damage. Through its consumer-centric approach, it seek to enable online research-based purchases of insurance and lending products and increase transparency, which enables consumers to make informed choices. It also facilitate its Insurer and Lending Partners in the financial services industry to innovate and design customised products for Consumers leveraging its extensive data insights and data analytics capabilities. The company launched Policybazaar, its flagship platform, in 2008 to respond to Consumers’ need for more awareness, choice and transparency and create a consumer-pull based, provider-neutral model for insurance distribution.
The company primarily generate revenues from the following sources: (i) for its Policybazaar business, from insurance commission that it receive from its Insurer Partners, and additional services that it provide to Insurer Partners such as telemarketing and other services relating to sales and post-sales services, account management, premium collection and various other services, (ii) for its Paisabazaar business, from the commission that it receive from its Lending Partners, credit advisory and related services that it provide to its Consumers or Lending Partners, and marketing services that it provide to financial services partners and other third parties, and (iii) for the Company, from providing online marketing, consulting and technology services to Insurer and Lending Partners.
The company’s Policybazaar platform is an online platform for Consumers and Insurer Partners to, respectively, buy and sell core insurance products. As of September 30, 2021, 48 Insurer Partners have offered over 390 term, health, motor, home and travel insurance products on its Policybazaar platform, representing a substantial portion of all licensed insurance companies in India. Policybazaar offers Consumers an information-rich, user-friendly, and tech-driven self-service platform for i) pre-purchase research, ii) purchase, including application, inspection, medical check-up and payment; and iii) post-purchase policy management, including claims facilitation, renewals, cancellations and refunds.
Proceed is being used for:
Enhancing visibility and awareness of company’s brands, including but not limited to ‘Policybazaar’ and ‘Paisabazaar’.
New opportunities to expand the consumer base including its offline presence.
Strategic investments and acquisitions.
Expanding presence outside India.
General corporate purposes.
Industry overview
India is the world’s 10th largest life insurance market, worth Rs 5.7 trillion ($76 billion) in FY2020 in terms of total premium. The new business premium from life insurance grew by 7.5% to Rs 2.8 trillion in FY2021. Despite being 10th largest, India’s life insurance penetration remains lower at 24.6% (25.0% as of March 2021), compared to 265.0% in USA & 95.4% in China when measured in terms of Sum Assured as % of GDP, as of March 2020. India’s life insurance market is expected to grow at 18.8% p.a. to reach Rs 31.9 trillion ($425 billion) in FY2030 from Rs 5.7 trillion ($76 billion) in FY2020, driven by favorable macro indicators, rising awareness towards financial products and services, digitization and simplification of products and processes, online channels for distributions, innovations and customizations in products and favorable government policies and regulatory push.
Industry participants are focusing on simplification of insurance process across the value chain ranging from documentation to underwriting to issuance. Introduction of eKYC, tele medicals, digital application forms and claim filing through website and linked bank accounts are some of the changes introduced by industry incumbents. Online players are playing a big role in making insurance purchase simpler and more convenient. Additionally, product and process innovation by manufacturers as well as insurtech players is narrowing the gap with consumer needs. Better policy management and easier claims process is also playing a key role in enhancing consumer experience. For example - adjustable life insurance, in which companies give policyholders the flexibility to modify premium payments, period of protection, and face amounts, thereby building confidence in life insurance products. Companies are also becoming better at assessing risks by adopting and deploying emerging technologies like data analytics and artificial intelligence and offering customized underwriting based on customer profile.
Pros and strengths
Consumer-friendly brands offering wide choice, transparency and convenience: The company offer wide choice, transparency and the ability for consumers to research and access insurance and personal credit products offered by its Insurer and Lending Partners. Through its consumer centric approach, it has created strong brands in both Policybazaar and Paisabazaar which is recognised throughout India. Policybazaar is a household name for insurance and is one of the most trusted insurance brands in India. The strength of company’s brands are also reflected in the fact that in Fiscal 2021, 83.0% of the policies sold on Policybazaar and 66.0% of loans originated on Paisabazaar were to consumers who came to its platform directly or through direct online brand searches. Similarly, in the three months ended June 30, 2021, 82.1% of policies sold on Policybazaar and 54.3% of loans originated on Paisabazaar were to Consumers who came to its platform directly or through direct brand searches.
Proprietary technology, data and intelligence stack: The company’s proprietary technology stack helps it design user-friendly Consumer journeys across all of its processes by automating various aspects across the product value chain. Using its technology, it engages with Consumers through easy-to-navigate mobile apps and websites which automate and digitise the Consumer journey of purchasing insurance and personal credit products. It has been leveraging technology to provide high quality consumer service. Additionally, it has enabled digital KYC or video KYC for many products sold on its platforms. The company also apply voice analytics and behavioural insights of Consumers, based on their browsing activities, time taken to fill forms, queries asked and many other activities, enabling it to detect fraud at the time of purchase and when filing claims. This enables its Insurer Partners to have better risk selection and pricing for insurance products, which has resulted in significantly higher quality financial and operating results through Policybazaar.
Collaborative partner for insurer and lending partners: The company provides its Insurer and Lending Partners with access to the large Consumer bases of both Policybazaar and Paisabazaar to enhance their sales. Using its data insights, its Insurer and Lending Partners are able to target the right Consumers for their products. The consumer acquisition cost for its Insurer and Lending Partners is one of the lowest through its platforms. It works with its Insurer and Lending Partners, leveraging its technology and insights to improve their risk assessment models, fraud detection and Underwriting capabilities. It also works with them to help them create customised products to address the needs of Consumers and market gaps and better serve their consumers.
Benefits from economies of segmentation: The company’s Policybazaar and Paisabazaar platforms serve Consumers with varied needs, credit profiles, demographics, employment types and income levels. It systematically segment Consumers into different cohorts based on their needs and disclosures, such as the insurance proposal questionnaire, medical declarations, family and lifestyle history, income and credit score to ensure higher accuracy of product offers. For Paisabazaar, it also aims to build customised lending solutions for different consumer segments. Its micro-segmentation has helped grow the product offerings on its platforms, streamline transaction processes, deepen partnerships with Insurer and Lending Partners, and offer tailor-made financial services solutions for varied segments.
Risks and concerns
Operate in dynamic and competitive online fintech industries: The company operates in India’s dynamic and competitive fintech industry, where its Policybazaar platform operates in India’s online insurance product and service industry, while its Paisabazaar platform operates in India’s online credit industry. These industries are relatively new, and business models continue to evolve. The regulatory framework governing the online insurance and credit industries are also developing and may change drastically in the near future. As its business develops and in response to competition, it will continue to provide data insights to its Insurer and Lending Partners to assist them to innovate and design better customised products for Consumers as well as to improve their existing products and continue to improve its service offerings or adjust and optimise its business model from time to time.
Business generates and processes large amount of data: The company’s platform stores and processes certain personal, transactional, financial and other sensitive data provided by Consumers, and, pursuant to its privacy policy, it make certain personal information provided by Consumers or third party data providers available to Insurer and Lending Partners in order to carry out its obligations under arrangements with such partners. Accordingly, it face inherent risks in handling large volumes of data and in protecting the security of such data. There are numerous laws regarding privacy and the storing, sharing, use, disclosure and protection of personally identifiable information and data. It cannot assure you that its existing privacy and personal protection systems and technical measures, such as web application firewalls, anti-bot software, automated throttling and IP reputation checks, will be considered sufficient under applicable laws and regulations.
Derive revenues from the sale of financial services products: The company derive revenues primarily from commissions and other fees paid by the Insurer and Lending Partners whose insurance and credit products its Consumers purchase on its platforms. The fee rates are set by Insurer and Lending Partners or negotiated between Insurer and Lending Partners and us. The commissions that it can charge to its Insurer Partners are based on charges specified under the IRDAI Commission Regulations which specify the maximum remuneration or commission payable to insurance brokers under life insurance products offered by life insurers, health insurance products offered by general insurers or standalone health insurers and general insurance products (other than motor products) as well as on motor products offered by general insurers. Further, the additional services provided by Policybazaar to Insurer Partners are based on rates agreed upon between the Insurer Partners and Policybazaar.
Rely on third-party vendors for payment processing services: The company currently rely on third-party vendors to provide payment processing services, including the processing of payments from credit cards and debit cards, and its business would be disrupted if these vendors become unwilling or unable to provide these services to it and it is unable to find a suitable replacement on a timely basis. If it or its processing vendors fail to maintain adequate systems for the authorisation and processing of card transactions, it could cause one or more of the major payment service provider companies to disallow its continued use of their payment products. In addition, if these systems fail to work properly and, as a result, it do not charge its Consumer or business partners’ cards on a timely basis or at all, its business, revenue, results of operations and financial condition could be harmed.
Outlook
PB Fintech is India's leading online platform for insurance and lending products. The company provides convenient access to insurance, credit, and other financial products and aims to create awareness in India about the financial impact of death, disease, and damage. In 2008, PB Fintech launched Policybazaar aimed at catering to consumers who need more information, choice, and transparency in insurance policies. Policybazaar is an online platform for consumers and insurer partners to buy and sell insurance products. Policybazaar offers its users with i) pre-purchase research, ii) purchase, including application, inspection, medical check-up, and payment; and iii) post-purchase policy management, including claims facilitation, renewals, cancellations, and refunds. The company's technology solutions are focused on automation and self-service-driven consumer experiences requiring minimal human intervention. On the concern side, the company rely on its ability to collect and analyse data to deliver its value propositions for its Consumers and Insurer Partners, such as its user-friendly experience for Consumers and high quality risk assessment simulation for Insurer Partners. Its Consumers rely on the insurance product information it provide on its platform. While such information is generally accurate, complete and reliable, there can be no assurance that the accuracy, completeness or reliability of the information can be maintained in the future.
The issue has been offered in a price band of Rs 940-980 per equity share. The aggregate size of the offer is around Rs 5708.64 crore to Rs 5951.56 crore based on lower and upper price band respectively. On the performance front, the company’s total income increased by Rs 1,018.50 million from Rs 8,555.63 million for Fiscal 2020 to Rs 9,574.13 million for Fiscal 2021, primarily due to an increase in revenue from operations amounting to Rs 1,153.65 million, partially offset by decrease in other income amounting to Rs 135.15 million. Its restated loss for the year decreased by Rs 1,537.87 million, or 50.6%, to Rs 1,502.42 million in Fiscal 2021 from Rs 3,040.29 million in Fiscal 2020. To supplement Policybazaar’s digital presence, the company plans to expand its presence through offline channels by leveraging its recently approved direct (life and general) insurance broker license. It aims to provide in-person Consumer engagement and services in local languages through its offline retail offices across India. Further, it also plans on developing a network of point-of-sale-persons across strategic locations in India. This will give more opportunities to micro-market specific product categories and influence Consumers at an earlier point in the sales process.
