Policybazaar slips 4% to touch new low; stock falls 25% in last one month

Shares of PB Fintech, the parent company of Policybazaar, hit a new low of Rs 862.80, down 4 per cent on the BSE in Tuesday’s intra-day trade in an otherwise firm market. With this, the stock has fallen below its previous low of Rs 884.95 touched on Friday, January 7, 2022, exchange data showed.

In the past one month, the market price of PB Fintech dipped 25 per cent after the mandatory lock-in period for anchor investors expired on December 13, 2021. In comparison, the S&P BSE Sensex was up 3 per cent during the same period.

With today’s fall, the stock has corrected 41 per cent from its all-time high of Rs 1,470 hit on November 17, 2021. Today, it was down 12 per cent against its issue price of Rs 980 per share. PB Fintech made its stock market debut on November 15, 2021.

On Monday after market hours, PB Fintech announced that the insurance premium originated by PB Fintech group posted a 67 percent year-on-year growth at Rs 1,786 crore in the October-December 2021 quarter (Q3FY22).

For the first three quarters (April- December) of the fiscal year 2021-2022 (9MFY22) it reported an aggregate premium, including that of both new and renewal business, at Rs 4,803 crore, up 38 per cent over 9MFY21. CLICK HERE FOR MORE DETAILS 

PB Fintech is a focused player in businesses with large and growing revenue pools. The business model is elegant with higher visibility on the path to profitability than most fintechs. It also has a leadership position among online distribution platforms.

In FY20, Policybazaar (set up in 2008) had over 90 per cent market share among insurance marketplaces and Paisabazaar (set up in 2014) had over 50 per cent market share among credit marketplaces. Policybazaar in particular has engaged intensely with the insurance regulator for over a decade and evolved accordingly.

Insurance and consumer credit in India are industries with high secular growth potential. The commission payouts by these industries represent a large and growing revenue pool for distributors – US$6 billion- was paid out in aggregate by insurers in F20, according to (IRDA - Insurance Regulatory and Development Authority of India) and ~US$3.5 billion is the revenue potential from lenders, said brokerage Morgan Stanley in a December 20, 2021 report.

Customer preference for online channels and market- places has been rising. This creates a significant long-term opportunity for PB Fintech, whose market share in these revenue pools is only about 1.2 per cent and 0.8 per cent, respectively, the brokerage said.

 According to sector analysts, insurance distribution is highly regulated, which should mitigate the risk of regulatory shocks to the company's business model. They forecast market share for FY27 in both insurance and consumer credit to be almost 5x above F21 levels.
 

Meanwhile, Policybazaar has evolved via intense engagement with the regulator and has recently acquired an insurance broker license where compliance requirements are higher than its erstwhile licenses. Share of online premiums in India is only about 1 per cent of total insurance premiums. Thus, offline is still a significantly large channel and Morgan Stanley believes the risk of retaliation by incumbent channels, as seen in some industries, is low, it said.