Almost twelve years back, in the year 2008, a young entrepreneur Yashish Dahiya had created a platform for examining, collating, and then for buying and selling insurance policies based on their rate, standard, and other essential aspects. He had created this platform because he thought this would help contribute to the Indian insurance policy segment by bringing lucidity to the market. This platform is called PolicyBazaar, and it is one of the leading marketplaces of insurance products in India. It provides an aggregator for policies without people having to go through the hassle of dozens of agents.
Recently, Policybazaar is focusing on raising around six thousand and five hundred cores through Initial Public Offering (IPO). After Mobikwik, Paytm, and Zomato, Policybazaar will be the next Indian start-up company this year, seeking to raise the market value of about five billion dollars. The start-up is presuming it to be a blend of an offer for sale and new shares, through which previous investors can depart. This strategy was similar to the proposed public request by Paytm. The start-up has hired investment bankers to overlook the verification procedure and also is aiming for a valuation. The main agenda is to launch the IPO before December 2021.
Few Aspects That People Should Be Aware Of The Operator Of IPO
- Public Issue: The issue consists of three thousand and seven-fifty crore as new shares and an offer sale of rupees two thousand two hundred and sixty-seven crore by previous shareholders. This offer sale comprises rupees one thousand eight hundred and seventy-five crore by SVF Python II and rupees three hundred and ninety-two crores by other selling investors.
- The Pre-Initial Public Offering (IPO) Placement: On discussing with the financial institutions and investment bankers, PB fintech might seek a private offering of the equity capital, which can be worth rupees seven hundred and fifty crores. If this strategy is performed, the amount of the new issue would be decreased accordingly by the pre-IPO placement.
- Goal: The startup had decided to consider the new issue proceeds after reducing the offer related expenditure, to enhance the brand exposure and recognition. They are also looking forward to various prospects for increasing their customers, primarily offline and outside India.
- Pandemic: During the COVID-19 crisis, the sales had doubled, and liabilities decreased as the business pulled back branding and marketing costs from seventy per cent of revenue in 2019 to forty- per cent in 2021. Policybazaar income fell in 2021 due to the coronavirus outbreak, government-mandated lockdowns, and the Central Bank of India’s suspension on loan interest charges. PB Fintech’s oldest company, PolicyBazaar, has historically provided the majority of its income.
- Strength and Strategy: The startup serves the customers with various demands, demography and income level, offering an extensive range of options, accessibility, and flexibility. The business intends to use execution skills, knowledge in the Indian financial services market, and partnerships with insurance and lender partners to design and offer solutions for SME and corporate clients. It intends to expand its activities and customer base in Dubai and throughout the Gulf Cooperation Council area.
- Market Opportunity: The customer market was rupees thirty-two lakhs in 2020 in terms of outstanding liability and has been estimated to reach one thousand and forty-one billion by 2030 representing a CAGR of nine per cent. Despite India having a tremendous market growth, the lending market in India is severely underserved, contributing for just sixteen per cent of nominal GDP, considerably less than the US’s seventy-nine per cent and China’s fifty-five per cent. This offers significant growth potential for PolicyBazaar’s digitalization lending service, which will be tapped in partnership with lending partners.
- The Future Aspects: The firm plans to expand online, and hence they have already set up fifteen offices on July 15th, 2021, and they seek to create two hundred physical retail outlets by the end of the year 2024. They plan on using one fifty crores raised from IPO for this purpose. Expenditure might even rise as the service attempts to duplicate and modify its revenue model and perhaps even chase possibilities in countries such as the Middle East and Southeast Asia. According to the DRHP, at least rupees three seventy-five crore from the IPO invested for worldwide growth.
- Deficits & Estimated Expenditure: Recently, the start-up in its DRHP stated that The firm has a background of deficits and expects to incur further costs in the future. However, the business reduced its losses to rupees one fifty crores in 2021, down from rupees three hundred and four crores in 2020. In 2019, the firm lost rupees three forty-six crore. They anticipate to rise over time, and their deficits will persist as they invest capital in developing their operation. The loss to raise the income sufficient to maintain pace with its expenditures and other expenditures might prohibit them from consistently attaining or expanding profitability or free cash flow.
- Litigation: The firm disclosed that its subsidiaries and several executives are engaged in legal procedures, but any unfavourable verdicts regarding the company may result in fines. The DRHP highlighted four outstanding litigations against the business, one hundred and five involving its subsidiaries and two involving executives totaling more than rupees three hundred crores.
- Dependence on Associates for Profit: Most Policy Bazaar’s earnings come through costs incurred by third-party insurers and lending partnerships. Any change in sales prices may impact operations. The corporation also relies on such corporate partners to keep operations running. One of the largest partners had contributed around thirty-two per cent of profits from operations in 2021.
- The Risk of Security Breaches: Failing to secure sensitive information, prevent hacking and security breaches, or inappropriate use or release of such data, according to PolicyBazaar, would have a substantial and negative impact on business. Furthermore, if third-party insurers and lending platforms failed to preserve data security, the company’s customers, operations, and financial situations may suffer.
- Regulation of subsidiaries: Regulatory bodies such as SEBI, the Central Bank, and, most significantly, the Insurance Regulatory and Development Authority of India supervise the company’s subsidiaries. The firm is subject to regular scrutiny and proper research by authorities. Any violation might lead to legislative action. In 2020, SEBI had issued an administrative warning to PolicyBazaar about violation of specific rules.
- Rivalry: PolicyBazaar expects rivalry from other online insurance aggregators and its partnerships, either offline or online distribution channels. The start-up states that new rivals can enter the market unexpectedly. Few of their competitors also offer their products on their platforms, which makes their rivals compete and corporate with them, affecting their sales on their platform. Their competitors may launch platforms with more appealing goods, content, and innovations with lower prices or better performance that they would not compete with. A few of their rivals could have more power to fund or acquire technological advances and respond faster to changing customer, insurance, and financial firm needs.
THE FUTURE ROAD
Rivalry is one of the major concerns highlighted by the firm in its IPO. As Initial public offering Paytm, Plum, and Coverfox compete in the broking market, Digit and Acko will provide digital insurance solutions. The startup states that the internet-based independent fintech sector in India in which Policybazaar continue to function are fiercely competitive, facilitated by India’s growing digitalization. Also, evolving governance systems from paper-based to cloud-based, improved credit assessment due to digital data consolidation, and India’s youngsters are driving digital efficiency and innovation. Achieving this fight will become more critical when PolicyBazaar moves onto a larger stage – the stock exchange. The startup intends to rise from the challenges as the founder always sums up the PolicyBazaar in a line, “The adventures will not go away soon.”