PolicyBazaar IPO: Lot size, price band, and all you should know about

The company aims to raise Rs 5,650 crore through the IPO.

PolicyBazaar IPO What you should know

PB Fintech, the parent company of PolicyBazaar and PaisaBazaar, is accepting equity subscriptions from Monday, November 1, 2021. PB Fintech is one of India's leading online aggregators for insurance and lending products and aims to create greater financial awareness among the masses. The company aims to raise about Rs 5,650 crore through the IPO, of which Rs 3,750 crore will be issued as fresh equity and Rs 1,900 crore as an offloading stake from existing shareholders.

What are the PolicyBazaar IPO details?

The price band for the listing has been fixed at Rs 940 to Rs 980 per share, with a lot size of 15 shares, and further application in multiplies of 15 shares thereafter for a total of 13 lots (195 shares).

Of the total issue size, 75% will be reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs) and the balance 10% for retail investors.

The IPO will be open for subscription between Monday, November 1 and Wednesday, November 3, with allotments expected on November 10, 2021.

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What will the funds be used for by PolicyBazaar?

PB Fintech will be utilising the funds to the tune of Rs 1500 crore to further increase brand awareness and visibility, not just limited to ‘PolicyBazaar’ and ‘PaisaBazaar’. About Rs 600 crores will be earmarked for strategic investments and acquisitions.

An investment of Rs 375 crores towards expanding the consumer base, including a foray into offline channels, and another investment of Rs 375 crores towards international expansion is also planned.

The funds will also be used for general corporate purposes.

What should investors know about the PolicyBazaar IPO?

According to Frost & Sullivan, PolicyBazaar was India’s largest digital insurance aggregator in 2020, with a 94.3% market share based on the number of policies sold. PaisaBazaar, on the other hand, is the largest digital credit place offering a range of financial products from credit cards, personal loans to business loans and mortgage products.

PolicyBazaar has 51 insurance partners on board, while PaisaBazaar has partnered with 54 banks, NBFCs and FinTech lenders. The large collaborative partnerships, extensive product suite, strong digital network and a capital-efficient model with low operating costs are some of the competitive strengths of the business that could yield results in the long run.

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However, analysts have a split opinion on the stock.

Abhay Doshi of unlistedarena.com believes the attraction for startup IPOs and strong subscriptions could drive a 15-20% upside on the listing. However, “for the long term, we need to be watchful on further performance and take decisions accordingly”, he added.

Aditya Kondawar, COO, JST Investments, says PolicyBazaar is loss-making and has put up a hard rating of ‘avoid’ basis the IPO valuations. ‘As per FY22A sales, the company is demanding 44x Price to sales, which is very expensive’, he said.

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Reliance Securities, too, believes the valuations are stretched but maintains a neutral outlook, ‘The long-term prospects look bright for the company as India’s insurance market is expected to clock 17.8% CAGR to reach $520 billion by FY30. The high competition in this space is a key headwind. We believe the current valuation factors most of the tailwinds for the next 2-3 years, and the upside looks limited.’

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