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1 | P a g e ( 3 1 s t O c t 2 1 )
For any further query, please email us on [email protected]
.
TABLE OF CONTENTS
PB Fintech Limited
Scalable model but brand building to deprive near term profitability
2 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Summary 3
Valuation and Peer Comparison 4
Bull & Bear Case Scenario 6
Financial Analysis and Projection 7
Story in Charts 9
How PFL’s business is structured 10
Key Management Persons 18
Risks & Concerns 18
Issue Structure and Offer Details 19
Financial Statement Analysis & Projections 20
Disclaimer 21
3 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Insurance and consumer credit are large growth opportunities with established
traction and substantial head room for growth given the under penetration. At 25%,
India has one of the lowest sums assured as a % of GDP among both, developed and
developing countries. This is expected to sustain a 17.8% decadal growth to INR 39.0
tr for the insurance vertical. The consumer lending business is also expected to grow
at a robust 9.0% CAGR to INR 78.1 tr by FY30. PB Fintech Limited (PFL) with its two
digital businesses ‘Policy bazaar’ and ‘Paisa bazaar’ straddles these two high growth
verticals and is expected to be the biggest beneficiary.
Given low operating costs, better disclosure levels, low commission costs than
traditional channels, fintech players like PFL are expected to disrupt traditional
business models of banks/ NBFC/financial intermediaries. With a dominant market
share of 93.4% (FY20) for Policy Bazar & 53.7% (FY21) Paisa Bazar and strong tail
winds from digital acceleration, rising financial literacy and burgeoning domestic
economy, both these businesses are expected to witness faster growth.
We forecast PFL to scale revenues at +40% CAGR to INR 2,518 cr over the period
FY21-24 driven by 37.5% CAGR to INR 1,576.3 cr in the insurance vertical, 36.6%
CAGR to INR 479.9 cr for the credit business & 71.6% CAGR of other business at INR
461.8 cr . With PFL in an investment mode, operating profits are expected to accrue
only in FY25. To sustain the cash burn, PFL is raising INR 3,750 cr via an IPO. This
fund raise along with the existing cash balance will provide PFL with a war chest of
INR 5000+ crore which should help sustain growth over the long term.
We value PFL at INR 1,108 (19X FY24 EV/Sales) and initiate coverage with a
subscribe for the long term. Our price objective represents an upside of 13.1% over
the IPO price of INR 980 over the next 24 months.
Apart from the IPO there is also an OFS portion of INR 1,959.7 cr which is on offer
from the existing shareholders.
Key Financial Data (INR Cr, unless specified)
Revenue EBITDA Net Profit
EBITDA (%)
Net Profit
(%)
Adj EPS (₹)
RoE (%) RoIC (%)
P/E (X) EV/
EBITDA (X)
EV/ Sales (X)
FY20 771.3 (319.9) (304.0) (41.5) (39.4) (144.9) (24.0) (232.1) (6.8) (131.6) 54.6
FY21 886.7 (159.8) (150.2) (18.0) (16.9) (293.2) (7.5) (458.8) (3.3) (263.5) 47.5
FY22E 1,239.2 (222.0) (215.0) (17.9) (17.4) (204.9) (3.8) (42.1) (4.8) (189.7) 34.0
FY23E 1,778.1 (228.6) (227.9) (12.9) (12.8) (193.3) (4.2) (36.9) (5.1) (184.2) 23.7
FY24E 2,518.0 (194.4) (210.0) (7.7) (8.3) (209.8) (4.1) (29.6) (4.7) (216.6) 16.7
Valuation ratios are based on higher price band and post issue valuation
SUBSCRIBE @ Upper Price Band of INR 980
Scalable model but brand building to deprive near term profitability
Industry Fintech
Issue Details
Listing BSE & NSE
Open Date 1,Nov 2021
Close Date 3,Nov 2021
Price Band INR 940-980
Face Value INR 2
Market Lot 15 shares
Minimum Lot 1 Lot
Issue Structure
Offer for Sale 34%
Fresh Issue 66%
Issue Size (Amt) INR 5,709 cr
Issue Size (Shares) 5,82,62,245
QIB Share (%) ≥ 75%
Non-Inst Share (%) ≤ 15%
Retail Share (%) ≤ 10%
Post issue M Cap INR 44,051 cr
PB Fintech Limited
4 | P a g e ( 3 1 s t O c t 2 1 )
For any further query, please email us on [email protected]
Valuation and Comparable Metric of Domestic and Global Online Platforms
Source: Ventura Research & Bloomberg
EV/Sales (X)
Company Name Mkt Cap Price 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 2023
Domestic Peers (In INR cr unless specified)
PB Fintech Ltd 44,051 980.0 34.0 23.7 (189.7) (184.2) (4.8) (5.1) (3.8) (4.2) (42.1) (36.9) 1239.2 1778.1 (17.9) (12.9) (17.4) (12.8)
FSN E–Commerce Ventures Ltd 53,204 1,125.0 15.2 10.4 352.6 142.2 1,058.8 235.6 3.7 14.1 10.7 28.9 3,447.0 5,065.5 4.3 7.3 1.5 4.5
Zomato Ltd 106,184 135.4 24.1 16.7 (101.1) (124.7) (132.3) (268.6) (5.0) (2.6) 0.0 2.4 3,976.0 5,758.3 (23.9) (13.4) (20.2) (6.9)
Jubilant Foodworks Ltd 48,894 3,705.0 10.7 8.7 42.4 34.0 100.6 75.6 27.4 29.2 32.4 34.2 4,531.0 5,514.1 25.4 25.7 10.7 11.7
Cartrade Tech Ltd 5,701 1,244.0 15.8 12.9 100.9 72.2 208.6 146.1 1.6 2.2 6.6 7.2 320.4 387.9 15.6 17.9 8.5 10.1
Info Edge (India) Ltd. 78,360 6,085.0 51.8 39.6 161.4 122.8 181.3 133.4 8.2 10.3 13.2 15.3 1,456.2 1,893.0 32.1 32.3 29.7 31.0
IRCTC Ltd 66,838 4,182.0 32.9 19.7 84.3 50.1 111.1 67.1 32.0 39.3 37.0 44.3 1,981.7 3,287.1 39.0 39.3 30.4 30.3
Nazara Technologies Ltd. 8,253 2,710.0 12.6 8.9 80.9 53.8 209.4 121.8 5.7 8.9 10.7 13.9 629.6 880.7 15.5 16.4 6.3 7.7
Easy Trip Planners Ltd. 5,172 476.0 35.5 27.3 83.2 61.6 62.8 46.5 37.3 37.2 42.3 42.2 139.1 180.8 42.7 44.3 59.2 61.5
Matrimony.Com Ltd. 2,271 993.0 4.8 4.2 22.4 17.0 40.2 28.8 18.2 21.5 23.2 26.5 427.9 484.0 21.3 24.8 13.2 16.3
Just Dial Ltd. 7,018 840.0 5.6 3.4 56.0 15.4 44.8 25.8 5.0 7.9 10.0 12.9 683.0 838.1 10.1 21.9 22.9 32.4
Global Peers (In US $mn unless specified)
Goosehead (USA) 5,468 147.7 26.7 19.2 115.6 80.1 292.9 168.8 (53.4) 795.5 (48.4) 800.5 209.4 290.8 23.1 24.0 8.9 11.1
Alibaba (China) 461,520 169.8 2.7 2.2 13.1 10.3 18.6 15.7 16.6 16.4 21.6 21.4 142,612.3 170,956.1 20.7 21.1 17.4 17.2
Amazon Inc (USA) 1,747,920 3,446.6 3.3 2.8 20.6 16.5 39.7 29.5 24.6 25.5 29.6 30.5 560,927.9 657,132.6 15.8 17.1 7.8 9.0
Moneysupermarket UK 1,569 2.9 3.0 2.8 9.8 8.3 14.5 12.2 35.7 39.0 40.7 44.0 530.0 568.8 31.0 33.0 20.4 22.6
Ebay Inc (USA) 45,329 72.4 4.2 3.9 11.2 10.3 16.3 14.7 34.4 36.4 39.4 41.4 10,933.8 11,514.4 37.7 37.6 25.5 26.8
JD.com (China) 124,457 40.8 0.6 0.5 25.4 16.3 39.3 25.4 8.9 12.5 13.9 17.5 181,945.7 215,267.0 2.3 2.9 1.7 2.3
MakeMyTrip (USA) 3,625 34.6 8.2 4.9 (604.8) 82.1 (153.3) (665.1) (2.8) (0.7) 2.2 4.3 411.0 698.7 (1.4) 5.9 (5.8) (0.8)
Everquote (USA) 407 14.0 0.9 0.9 14.0 11.2 (141.1) 89.9 (2.6) 3.1 2.4 8.1 524.3 620.5 6.8 7.9 (0.5) 0.7
Lemonade (USA) 3,901 63.4 15.2 10.9 (16.4) (18.8) (15.9) (16.3) (30.5) (39.1) (25.5) (34.1) 207.1 311.4 (92.8) (58.2) (118.4) (76.9)
Net Margin (%)EV/EBITDA (X) P/E (X) RoE (%) RoIC (%) Sales EBITDA Margin (%)
For any further query, please email us on [email protected]
5 | P a g e ( 3 1 s t O c t 2 1 )
For any further query, please email us on [email protected]
Compared to other platform companies, PFL is still into nascent stage and we do not expect it to make operating profit anytime soon
Source: Ventura Research, ACE Equity & Bloomberg, Size of bubble represents revenue
PB Fintech
Nykaa
Zomato
Jub Foodworks
Cartrade
Naukri
IRCTC
Nazaara
Easy trip
MatrimonyJust Dial
Alibaba Amazon
Moneysupermarket
Ebay Inc
JD.Com
Makemytrip
Everquote
Lemonade
0
5
10
15
20
25
30
35
40
45
(50) (40) (30) (20) (10) 0 10 20 30 40 50
RoIC
FY23 EV/sales
PB Fintech
Nykaa
Zomato
Jub Foodworks
Cartrade
Naukri
IRCTC
Nazaara
Easy trip
Matrimony
Just Dial
-20
0
20
40
60
80
100
120
140
(30) (20) (10) 0 10 20 30 40 50 60
EBITDA margin %
Revenue CAGR
6 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Our Bull and Bear Case Scenarios
We have prepared a Bull and Bear case scenario based on PFL’s FY24 Sales CAGR, EBITDA
margins and EV to Sales valuation.
Bull Case: We have assumed a 50% revenue CAGR to INR 3,000 cr by FY24 and EBITDA
margin of 5.0%, along with the valuation re-rating to 22X FY24EV/Sales, which will
result in a Bull Case price target of INR 1,425 per share (an upside of 45% from the
upper band IPO price of INR 980 per share).
Bear Case: We have assumed a 31% revenue CAGR to INR 2,000 cr by FY24 and EBITDA
margin of (15)%, along with the valuation de-rating to 15X FY24EV/Sales, which will
result in a Bear Case price target of INR 624 per share (a downside of 36% from the
upper band IPO price of INR 980 per share).
Bull & Bear Case Scenario
Investment Triggers
Underpenetrated insurance & lending market, digital acceleration post COVID.
Lower customer acquisition cost, scalable model and network effect can come into
play.
Catalysts
Faster expansion into tier 2/3 markets.
Bull Case Price
INR 1,364 per share
Target Price
INR 1,108 per share
Bear Case Price
INR 624 per share
IPO Price
INR 980 per share
Sales CAGR of 31% by FY24, EBITDA
margin of -15% and 15X EV/Sales
Sales CAGR of 50% by FY24, EBITDA
margin of 5% and 22X EV/Sales
Sales CAGR of 41.6% by FY24, EBITDA
margin of -7.7% and 19X EV/Sales
7 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Financial Analysis and Projections
During FY19-21, PFL demonstrated a robust revenue CAGR of 34.2% to INR 887 cr, driven by
Policy bazaar (Insurance platform) revenues growing at a CAGR of 25.1% to INR 606.9
cr
Paise bazaar (lending platform) revenues growing at a CAGR of 6.8% to INR 188.3 cr
PB Fintech (marketing & consulting) & other revenues growing at a CAGR of 49.6% to
INR 91.4 cr.
It is to be noted that subdued revenue growth of Paisa bazaar was on the back of 55% fall in
disbursals in FY21 due to pandemic although the segment achieved maiden PBT of INR 13.6 cr.
Operating leverage helped in narrowing of consolidated EBITDA loss from INR 336.1 cr in FY19
to INR 159.8 cr in FY21 leading to a jump in EBITDA margins by ~50ppt.
Over the forecast period FY21-24E, we expect the consolidated revenues to grow at a CAGR of
41.6% to INR 2,518 cr driven by
37.5% CAGR growth in revenues of Policy bazaar to INR 1,576.3 cr
36.6% CAGR growth in revenues of Paise bazaar to INR 479.9 cr
71.6% CAGR growth in revenues of PB Fintech to INR 461.8 cr
We expect the consolidated EBITDA losses to widen from INR 159.8 cr in FY21 to INR 194.4 cr
in FY24 due to acceleration in business development and marketing spend (A&P). Given that
PFL does not have any debt, the cash balance of ~INR 1,800 cr cash coupled with the fresh
issue of ~INR 3,750 cr would mean that PFL will continue to have elevated opex and A&P spend
over the forecast period. Being in an investment phase, operating profitability is expected to
be achieved only by FY25. However, we draw comfort from the fact that the faster growth in
consolidated revenues will help better EBITDA margins by 1,030 bps to (7.7)% in FY24E.
8 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
PFL’s Financial Summary
Source: Company Reports
Fig in INR Cr (unless
specified)FY20 FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E
Revenues 771.3 886.7 1,239.2 1,778.1 2,518.0 3,457.8 4,613.5 5,985.7 7,649.5 9,583.8 11,716.8
YoY Growth (%) 56.7 15.0 39.8 43.5 41.6 37.3 33.4 29.7 27.8 25.3 22.3
Policybazaar 515.9 606.9 817.0 1,127.5 1,576.3 2,159.9 2,898.7 3,818.8 4,939.8 6,230.4 7,622.1
YoY Growth (%) 66.3 17.6 30.0 27.0 25.0 20.0 18.0 16.0 15.0 13.0 10.0
Paisabazaar 226.2 188.3 355.3 484.7 652.0 863.7 1,128.5 1,404.6 1,718.3 2,113.3 2,543.4
YoY Growth (%) 46.3 (16.7) 30.0 27.0 25.0 20.0 18.0 16.0 15.0 13.0 10.0
PB fintech/Other 29.2 91.4 155.4 298.3 461.8 654.5 861.6 1,098.3 1,394.5 1,723.8 2,122.1
YoY Growth (%) 7.0 213.2 70.0 91.9 54.8 41.7 31.6 27.5 27.0 23.6 23.1
Employee Cost 520.8 554.0 745.5 950.3 1,187.5 1,461.2 1,763.6 2,077.3 2,395.6 2,743.8 3,032.0
Advertisement 445.2 367.8 583.8 795.2 1,101.1 1,455.3 1,806.1 2,157.8 2,479.2 2,785.5 3,062.5
Other expense 125.1 124.5 131.9 261.2 423.9 534.7 647.9 839.9 1,018.4 1,257.8 1,525.6
EBITDA (319.9) (159.8) (222.0) (228.6) (194.4) 6.7 395.9 910.7 1,756.4 2,796.7 4,096.6
YoY Growth (%) (4.8) (50.1) 38.9 3.0 (15.0) (103.4) 5,840.4 130.0 92.9 59.2 46.5
Margin (%) (41.5) (18.0) (17.9) (12.9) (7.7) 0.2 8.6 15.2 23.0 29.2 35.0
Policybazaar (179.3) (149.5) (212.9) (239.8) (253.1) (204.7) (21.4) 321.7 885.8 1,611.6 2,488.6
YoY Growth (%) (13.3) (16.6) 42.4 12.7 5.5 (19.1) (89.5) (1,601.3) 175.4 81.9 54.4
Paisabazaar (96.6) 16.0 29.7 55.9 104.9 178.6 288.1 391.3 522.0 719.7 971.4
YoY Growth (%) 2.0 (116.6) 85.7 88.1 87.6 70.2 61.3 35.8 33.4 37.9 35.0
PB fintech (44.0) (26.3) (38.9) (44.7) (46.2) 32.7 129.2 197.7 348.6 465.4 636.6
YoY Growth (%) 26.9 (40.2) 47.6 15.2 3.2 (170.9) 294.9 53.0 76.3 33.5 36.8
Consolidated PAT (304.0) (150.2) (215.0) (227.9) (210.0) (42.6) 297.8 733.1 1,430.7 2,132.4 3,133.1
YoY Growth (%) (12.3) (50.6) 43.1 6.0 (7.8) (79.7) (798.6) 146.2 95.2 49.0 46.9
Margin (%) (39.4) (16.9) (17.4) (12.8) (8.3) (1.2) 6.5 12.2 18.7 22.3 26.7
Shareholders' Fund 1,265.8 1,991.7 5,607.7 5,379.8 5,169.8 5,127.2 5,425.0 6,158.1 7,588.8 9,721.2 12,854.3
RoE % (24.0) (7.5) (3.8) (4.2) (4.1) (0.8) 5.5 11.9 18.9 21.9 24.4
Capital Employed 1,265.8 1,991.7 5,607.7 5,379.8 5,169.8 5,127.2 5,425.0 6,158.1 7,588.8 9,721.2 12,854.3
RoCE % (29.0) (10.1) (4.8) (5.4) (5.2) (1.5) 5.5 13.0 21.5 27.4 30.7
Invested Capital 158.2 43.8 644.3 787.8 910.9 1,181.0 1,512.8 1,858.5 2,251.1 2,745.1 3,414.4
RoIC % (232.1) (458.8) (42.1) (36.9) (29.6) (6.7) 19.8 43.2 72.6 96.9 115.7
CFO (364.0) 28.7 (421.1) (445.4) (425.2) (365.4) (82.1) 342.3 966.2 1,600.1 2,424.4
CFI 78.7 (1,201.8) 1,394.7 46.2 55.2 11.7 (4.6) (22.3) (13.6) (28.0) (39.3)
CFF 1,031.3 758.8 3,378.4 (15.2) (16.8) (18.3) (19.5) (20.7) (21.9) (23.0) (24.1)
Net Cash Flow 746.0 (414.2) 4,352.0 (414.4) (386.8) (371.9) (106.3) 299.3 930.6 1,549.0 2,361.0
NOPLAT (378.6) (212.9) (279.5) (301.3) (305.4) 166.3 216.6 627.7 1,305.3 1,990.4 2,955.4
Free Cash Flow (203.8) (83.6) (474.0) (485.2) (471.0) (470.6) (218.9) 164.5 773.6 1,359.3 2,123.5
RoE (%) (24.0) (7.5) (3.8) (4.2) (4.1) (0.8) 5.5 11.9 18.9 21.9 24.4
RoIC (%) (232.1) (458.8) (42.1) (36.9) (29.6) (6.7) 19.8 43.2 72.6 96.9 115.7
EV/sales (x) 54.6 47.5 34.0 23.7 16.7 12.2 9.1 7.0 5.5 4.4 3.6
EV/EBITDA (x) (131.6) (263.5) (189.7) (184.2) (216.6) 6,317.0 106.3 46.2 24.0 15.1 10.3
M.cap/sales (x) 57.1 49.7 35.5 24.8 17.5 12.7 9.5 7.4 5.8 4.6 3.8
9 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
PFL’s Financial Performance
Source: Company Reports
310 516 607
817 1,127
1,576
155 226 188
267
352
480
27
29 91
155
298
462
-
500
1,000
1,500
2,000
2,500
3,000
FY19 FY20 FY21 FY22E FY23E FY24E
INR
cr
Revenues are expected to grow at 41.6% CAGR
Policy bazaar Paise bazaar PB Fintech
-80
-70
-60
-50
-40
-30
-20
-10
0
-400
-350
-300
-250
-200
-150
-100
-50
0
FY19 FY20 FY21 FY22E FY23E FY24E
%
INR
Cr
Margins are expected to move by 1030bps over FY21-24E
EBITDA Margins
-500
-450
-400
-350
-300
-250
-200
-150
-100
-50
0
0
100
200
300
400
500
600
700
800
900
1000
FY19 FY20 FY21 FY22E FY23E FY24E
%
INR
cr
PFL business is scalable at minimal costs
Invested capital RoIC
-1.0
-1.0
-0.9
-0.9
-0.8
-0.8
-0.7
-0.7
-0.6
(6,000)
(5,000)
(4,000)
(3,000)
(2,000)
(1,000)
0
FY19 FY20 FY21 FY22E FY23E FY24E
PFL is expected to invest heavily in brand building
Net debt Net debt to equity
Story in Charts
INR cr
10 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
How PFL’s business is structured
Source: Company Reports & Ventura Research
Understanding the business model of PFL PFL is India’s largest online platform for insurance and lending products. The company provides
convenient digital access to insurance, credit and other financial products.
PFL in houses 2 primary business:
Policy bazaar- India’s largest digital insurance marketplace among all online insurance
distributors with 93.4% market share based on number of policies sold in FY20.
Policy bazaar primarily generates revenues through the following ways:
Insurance commissions – commissions earned on the solicitation of insurance
products/policies based on the percentage of premiums originated.
Outsourcing services – services provided to insurers in relation to activities outsourced
by them, such as telemarketing, sales and post-sales services, account management,
premium collection, etc.
Rewards – earned from insurance partners, generally based on volume and quality.
Paisa bazaar- India’s largest digital consumer credit marketplace with a 53.7% market share,
based on disbursals in FY21. Paisa bazaar is also widely used to access credit scores, with
approximately 2.25 cr consumers cumulatively having accessed their credit score through the
platform as of Q1FY22.
Paisa bazaar primarily generates revenues through following ways:
PB Fintech Ltd
Poicy bazaar (100% stake)
Paisa bazaar (100% stake)
PB Fintech (marketing &
consulting) & others (100% stake)
11 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Commissions on online aggregation – commissions earned from the sale of financial
products based on a percentage of loan disbursals or a fixed fee in the case of credit
cards.
Online marketing and consulting services – includes bulk emailers, advertisement
banners on its website and credit score advisory services.
Sale of leads – revenue from the sale of lead information of potential customers to
banks, etc.
Beside the 2 main business, PFL also in houses other subsidiaries like PB Fintech (marketing &
consulting)/ others which provides marketing and consulting services to insurer and lending
partners
PB Fintech (marketing & consulting)/Other businesses primarily generates revenues through
following ways:
Online marketing and consulting services – provided to insurers and lending partners
for types of services provided.
IT support services – services related to IT applications and solutions, such as
enhancing tech capability and digitizing and enhancing the platforms.
Policy bazaar is expected to witness 37.5% CAGR revenue growth over FY21-24 to
INR 1,576.3 cr due to the following:
Insurance sector to witness decadal growth citing multiple tailwinds
In FY2020, size of the Indian insurance sector stood at INR 7.6 trillion (US$ 102 billion) in terms
of total Premium. As per Frost & Sullivan, this industry is expected to grow at a 17.8% CAGR to
reach INR 39.0 trillion (US$ 520 billion) by FY2030, with life, health and other non-life insurance
growing at 18.8%, 15.3% and 13.5% CAGR respectively. In FY21, India’s non-life insurance
industry grew by 5.2% to INR 2.0 trillion, with health, motor and other non-life insurance at
INR 0.6 trillion, INR 0.7 trillion and INR 0.7 trillion respectively, in terms of total Premium.
Insurance industry is expected to grow in high double digits
Source: Company Reports & Ventura Research
5.7
31.9
0
10
20
30
40
50
FY20 FY30P
INR
Tn
Insurance industry is expected to grow at 17.8% CAGR over FY20-30P
Life Health Motor Other
12 | P a g e ( 3 1 s t O c t 2 0 2 1 )
For any further query, please email us on [email protected]
Significant under penetration of Insurance in India provides structural growth
opportunity
Compared to global peers, India has a highly underpenetrated insurance market. India was
amongst the lowest in the world in terms of sum assured as % of GDP in FY2021. In terms of
protection gap (income replacement plus household debt less total savings, non primary
property value, life insurance, other assets), India stands at one of the highest levels as on 2019
which highlights that people in India are highly underinsured.
High under penetration in insurance provides long term growth trajectory for Policy bazaar
Source: Company Reports
83.3
37.6
5.5
0
10
20
30
40
50
60
70
80
90
US China India
INR
th
ou
san
d
India has low health expenditure per capita
63%
28%
11%
0%
10%
20%
30%
40%
50%
60%
70%
India China US
63% of healthcare spent is out of pocket in India
83%
70%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
India China US
India has a significant protection gap
265%
95%
25%
0%
50%
100%
150%
200%
250%
300%
US China India
India has lowest sum assured as a % of GDP
13 | P a g e ( 3 1 s t O c t 2 0 2 1 )
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High renewal rates provide clear visibility into future business
As per the company due to its strong value proposition and the nature of many insurance
products, such as health and motor insurance where renewals are common, Policy bazaar is
expected to benefit from long term retention and visibility of business from existing consumers
with negligible marginal cost of acquisition (CAC).
For example, as of FY21, consumers who purchased health insurance through Policy bazaar in
FY14 for the first time have made repeated health insurance purchases worth 5.9x the 2014
premium. Similarly, the multiplier is 3.4 times for motor insurance.
Repeat customers with higher premium amount at negligible CAC will help to push EBITDA margins
Source: Company Reports
Rising awareness about insurance products coupled with digital acceleration bodes
well for Policy bazaar
COVID-19 has created an awareness among consumers about the importance and need for
having insurance. Increasing consumer awareness for insurance products, particularly term
and health, which are easier to sell, would likely support the growth momentum over the
medium term. Also, India’s active Internet user base is expected to increase to ~90 cr in FY26
at 14.9% CAGR over FY21 which augurs well for online market players like Policy bazaar.
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India’s digitization trend
Source: Company Reports, Ventura research
Fragmented insurance broking industry augurs well for the growth of aggregators
like Policy bazaar
The biggest USP of Policy bazaar is that insurance buyers can compare plans from various
insurer’s and select the best suited one based on cost and other offerings and benefits of the
plans on offer. This is a significant advantage over individual agents who are usually attached
to single insurance company.
In addition, the commissions of digital aggregators are lower than those offered by individual
agents. This provides an opportunity for online digital aggregators to gain from consolidation.
Further, product information dissemination and service quality offering is far superior than
those of individual agents.
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Paisa bazaar is expected to see revenues grow at 36.6% CAGR over FY21-24 to INR
479.9 cr due to the following
Consumer credit is expected to grow at 9.0% CAGR over FY21-30
India’s consumer lending market is expected to witness 9.0% CAGR, to reach INR 78.1 trillion
AUM by FY30 from INR 36.0 trillion reported in FY21. This growth is expected to be driven by:
improving financial literacy
growing discretionary spending
evolving consumer behavior to avail credit to fund regular expenses
wider reach of lending institutions, digitization by incumbents including KYC &
application processes, &
entry of new age tech lending players and aggregators
Consumer credit market is expected to grow in high single digit
Source: Company Reports
India’s lending industry is highly underpenetrated
India US China
Credit card lending as a % of GDP 0.4% 14.7% 51.9%
No. of credit cards as a % of population 4.5% 137.3% 56.8%
Housing credit o/s as a % of GDP 11.4% 57.8% 41.2%
Source: Company Reports & Ventura Research
79%
56%
18%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
US China India
Outstanding loan balance as a % of nominal GDP
36.0
49.0
78.1
0
10
20
30
40
50
60
70
80
90
FY21 FY25E FY30E
INR
Tri
llio
n
Consumer credit market in India
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High growth rates to persist through the decade
Source: Company Reports
Digital offering provides scalability with low operating costs while brand building has
helped create network effect for PFL
PFL does not carry any underwriting or credit risks as it only aggregates and distributes
insurance and personal credit products offered by insurers and lenders. Policy bazaar has 48
Insurer Partners as of Q2FY22 which represents 84.5% of all licensed insurers in India while
Paisa bazaar is India's largest consumer credit marketplace with a 53.7% market share (based
on disbursals in FY21). Paisa bazaar has 56 partnerships with large banks, large NBFCs and
fintech lenders.
With the brand getting increasingly pervasive, network effects and repeat customers should
lead to higher direct visits and conversion without any incremental marketing costs being
incurred. The fact that 83.0% of the policy sales on Policy bazaar and 66.0% of loans
3.5
6.8
13.3
0
2
4
6
8
10
12
14
FY21 FY25E FY30E
INR
Tri
llio
n
Disbursals in personal loan
0.8
3.5
8
0
1
2
3
4
5
6
7
8
9
FY21 FY25E FY30E
INR
Tri
llio
n
Disbursals in credit card
22.5
29.6
44.1
0
5
10
15
20
25
30
35
40
45
50
FY21 FY25E FY30E
INR
Tri
llio
n
Outstanding housing credit
2.9 3.1 1.4 3.2 3.5 3.9 2.0
14.7 14.6
3.2
6.99.2 9.0
8.3
9.8 9.8
2.7
7.7
9.6 9.8
8.5
0
5
10
15
20
25
30
Q3FY20Q4FY20Q1FY21Q2FY21Q3FY21Q4FY21Q1FY22
In m
n
Inquiry levels for credit has started picking up post COVID
Home loans Personal loans Credit cards
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originations on Paisa bazaar are to consumers who access the platform directly or through
online brand search is testimony of the growing stature of the brand.
As the platform and consumer cohorts continue to develop, it is expected that a larger
proportion of consumers will buy either unassisted or with reduced levels of assistance which
should increase capital and operational efficiency.
PFL is expected to benefit from powerful network effects at scale as a result of its positioning
as a trusted and default search engine for insurance and personal credit products in India. The
large and growing number of visitors to Policy bazaar and Paisa bazaar platforms attract more
Insurer and Lending Partners who offer more products, which in turn further attracts more
consumers, creating a virtuous cycle.
Policy bazaar already has high database of consumers
Source: Company Reports & Ventura Research
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Management Team
Source: Company Reports
Key Risks & Concerns
Competition- The company operates in the competitive fintech 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 which can have a severe effect on the
operations of the company.
High brand building investments- One of the objects of the IPO is to undertake
investments in enhancing visibility and awareness of brands “Policy bazaar” and “Paisa
bazaar”. The company expects to utilize INR 1,500 cr in a brand building exercise but
the manner in which such expenditure or investment will be made, or the outcome of
such expenditure or investment, is not ascertainable at this stage.
High dependence on lending and insurer partners- PFL’s ability to attract consumers
depends on the quantity and quality of the insurance and credit products offered by
the partners on Policy bazaar and Paisa bazaar platforms respectively. The
arrangements with partners are typically not exclusive, and they may have similar or
more favorable arrangements with competitors. If the partners are dissatisfied with
services and solutions or find it ineffective in enhancing their profitability, they may
terminate their relationships with the company or switch to competitors.
Regulated cap on insurance commission- Policy bazaar is now an insurance broker as
it had applied and received a license for the same from IRDAI in June,21. The
commissions that Policy bazaar can charge to Insurer Partners is regulated. The IRDAI
Commission Regulations specify the maximum remuneration or commission payable
to insurance brokers under life insurance products offered by life insurers, health
Key Person Designation Details
Mr. Yashish
Dahiya
Chairman & CEO,
Founder
He holds a bachelor’s degree in technology from IIT, Delhi, PGDM from IIM,
Ahmedabad and a MBA from INSEAD,France. He was previously associated with
Bain & Company Inc. (London), eBookers PLC (UK) etc.
Mr. Alok Bansal WTD & CFO, Founder
He holds a bachelor’s degree in technology and a PGDM from IIM,Calcutta. He was
previously associated with Voltas Limited, General Electric International
Operations Co. Inc. (India).
Mr. Sarbvir
Singh
President of
Policybazaar
He holds an integrated master’s degree in mathematics and computer
applications from IIT, Delhi.
Mr Naveen
Kukreja
Co-founder & CEO,
Paisabazaar
He holds a PGDM from IIM, Calcutta and has previosly worked with Citibank,
Capital One (Europe).
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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.
IT data security - The company relies extensively on information technology systems
and any weakness, disruption or failure in such systems, or breach of data, could
adversely affect operations and reputation. The company may face cyber threats
attempting to exploit its network to disrupt products and support services to
customers and/ or theft of sensitive internal data or customer information
Issue Structure and Offer Details
The proposed issue size of PFL’s IPO is INR 5,709.7 cr, out of which INR 3,750 cr is a fresh issue
and the rest INR 1,960 cr is an offer for sale. The price band for the issue is in the range of INR
940-980 and the bid lot is 15 shares and multiples thereof.
Issue strcture
Category Allocation
QIB At least 75% of public issue
Non institutional buyers Not more than 15% of public issue
Retail Not more than 10% of public issue
Source: Company Reports & Ventura Research
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Financial Analysis & Projections
Figures in Rs Cr FY20 FY21 FY22E FY23E FY24E Figures in Rs Cr FY20 FY21 FY22E FY23E FY24E
Income Statement Per Share Data & Yields
Net Revenue 771.3 886.7 1239.2 1778.1 2518.0 Adjusted EPS (144.9) (293.2) (204.9) (193.3) (209.8)
YoY Growth (%) 56.7 15.0 39.8 43.5 41.6 Adjusted BVPS 28.2 44.3 124.8 119.7 115.0
Network & internet expenses 50.8 58.8 87.0 117.7 156.1 CFO per share (8.1) 0.6 (9.4) (9.9) (9.5)
YoY Growth (%) 60.0 15.8 48.0 35.2 32.7 FCF per share (4.5) (1.9) (10.5) (10.8) (10.5)
Employee Benefit Expenses 520.8 554.0 745.5 950.3 1187.5
YoY Growth (%) 31.0 6.4 34.6 27.5 25.0 Solvency Ratio (X)
Other Operating Expenses 74.4 65.7 44.9 143.6 267.7 Net Debt to Equity (0.9) (1.0) (0.9) (0.9) (0.8)
YoY Growth (%) 40.0 (11.6) (31.8) 220.1 86.5 Net Debt to EBITDA 3.5 12.2 22.4 20.1 21.9
Ad Expenses 445.2 367.8 583.8 795.2 1101.1 Interest Coverage Ratio (30.8) (17.5) (20.0) (19.1) (16.1)
YoY Growth (%) 28.7 (17.4) 58.7 36.2 38.5
EBITDA (319.9) (159.8) (222.0) (228.6) (194.4) Working Capital Ratios
YoY Growth (%) (4.8) (50.1) 38.9 3.0 (15.0) Payable Days 55.8 42.0 40.0 39.0 39.0
Margin (%) (41.5) (18.0) (17.9) (12.9) (7.7) Receivable Days 84.6 71.2 75.0 77.0 75.0
Depreciation & Amortization 47.3 41.4 49.5 61.9 75.0 Inventory Days 0.0 0.0 0.0 0.0 0.0
EBIT (367.2) (201.1) (271.5) (290.5) (269.3) Net Working Capital Days 28.8 29.2 35.0 38.0 36.0
YoY Growth (%) 0.2 (45.2) 35.0 7.0 (7.3)
Margin (%) (47.6) (22.7) (21.9) (16.3) (10.7) Return Ratios (%)
Other Income 84.3 70.8 76.2 86.0 100.9 RoE (24.0) (7.5) (3.8) (4.2) (4.1)
Exceptional Items 0.0 0.0 0.0 0.0 0.0 RoCE (29.0) (10.1) (4.8) (5.4) (5.2)
Finance Cost 11.9 11.5 13.6 15.2 16.8 RoIC (232.1) (458.8) (42.1) (36.9) (29.6)
PBT (294.8) (141.9) (208.9) (219.7) (185.2)
YoY Growth (%) (12.6) (51.9) 47.2 5.2 (15.7) Valuation (X)
Margin (%) (38.2) (16.0) (16.9) (12.4) (7.4) P/E (6.8) (3.3) (4.8) (5.1) (4.7)
Tax 9.2 8.3 6.2 8.2 24.8 P/BV 34.8 22.1 7.9 8.2 8.5
Tax Rate (%) (3.1) (5.9) (3.0) (3.7) (13.4) EV/EBITDA (131.6) (263.5) (189.7) (184.2) (216.6)
PAT (304.0) (150.2) (215.0) (227.9) (210.0) EV/sales 54.6 47.5 34.0 23.7 16.7
YoY Growth (%) (12.3) (50.6) 43.1 6.0 (7.8)
Margin (%) (39.4) (16.9) (17.4) (12.8) (8.3) Cash Flow Statement
Profit Before Tax (294.8) (141.9) (208.9) (219.7) (185.2)
Balance Sheet Add: Depreciation 47.3 41.4 49.5 61.9 75.0
Share Capital 1.1 1.2 89.9 89.9 89.9 Add: Finance Cost (net) (72.3) (59.2) (62.6) (70.8) (84.1)
Total Reserves 1264.7 1990.5 5517.8 5289.9 5079.9 Others 19.0 100.0 21.2 10.8 11.1
Shareholders' Fund 1265.8 1991.7 5607.7 5379.8 5169.8 Change in working capital (24.0) 39.4 (214.1) (219.4) (217.1)
Long term borrowings 0.0 0.0 0.0 0.0 0.0 Less: Tax Paid (39.2) 48.5 (6.2) (8.2) (24.8)
Lease liabilities 93.5 95.8 120.0 150.0 175.0 Cash Flow from Operations (364.1) 28.1 (421.1) (445.4) (425.2)
Other non current liabilities 13.6 22.2 35.0 40.0 55.0 Net Capital Expenditure 160.2 (112.3) (53.0) (39.8) (45.7)
Total Liabilities 1372.9 2109.8 5762.7 5569.8 5399.8 Others (81.5) (1089.5) 1447.6 86.0 100.9
Gross Block 206.1 212.1 265.1 304.9 350.7 Cash Flow from Investing 78.7 (1201.8) 1394.7 46.2 55.2
Less: Accumulated Depreciation 58.8 87.4 136.9 198.8 273.7 Share capital issue 1059.4 780.9 3392.0 0.0 0.0
Net Block 147.3 124.8 128.3 106.2 76.9 Other financial activities (28.1) (22.1) (13.6) (15.2) (16.8)
Other financial assets 5.9 10.5 12.3 19.0 26.1 Cash Flow from Financing 1031.3 758.8 3378.4 (15.2) (16.8)
Other non current assets 111.8 55.9 69.9 87.4 109.3 Net Cash Flow 745.9 (414.8) 4352.0 (414.4) (386.8)
Net Current Assets 1107.9 1918.5 5552.4 5357.5 5187.8 Opening Balance of Cash 107.0 853.4 439.2 4791.2 4376.9
Total Assets 1372.9 2109.8 5762.7 5569.8 5399.8 Closing Balance of Cash 852.9 438.6 4791.2 4376.9 3990.0
21 | P a g e ( 3 1 s t O c t 2 0 2 1 )
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