Synopsis: India’s largest digital insurance aggregator, Policy Bazaar, is all set to join the list of start-ups going public as they filed the draft red herring prospectus(DRHP) earlier today.
PB Fintech Ltd, the parent company of Policybazaar, filed a DRHP with the SEBI to raise Rs 6,017.5 cr via an initial public offering (IPO) seeking a valuation of $5.5-6 billion.
PolicyBazaar is backed by marquee investors such as Softbank, Temasek, Info Edge, among few others.
The IPO comprises a fresh issue of Rs3,750 cr worth of equity shares and an offer for sale(OFS) of Rs2,267.50 cr by existing shareholders and promoters. The company also looks to raise around Rs750 cr by way of a pre- IPO private placement of equity shares.
The proceeds of the issue are said to be used for scaling up operations and brand presence in UAE and the broader Gulf Cooperation Council region.
The IPO will most likely launch in December. The IPO is going to be one of the biggest tech IPOs in India, following the path of Zomato that went public last week.
The online insurance aggregator’s listing plans come on the back of a steep surge in the demand for life and health insurance products post the COVID-19 outbreak.
Kotak Mahindra Capital Company, Morgan Stanley India, Citigroup Global Markets India, ICICI Securities, HDFC Bank Ltd, IIFL Securities, and Jeffries India have been appointed as the lead book runners to the issue.
Policybazaar has an overall market share of 25% in the life insurance segment and 10% in health insurance. In the digital space, the company is the largest in terms of market share(93%) and sales volume(65%) in FY20. The company claims that every second term life policy is bought through its platform.
Earlier this year, the company had raised $75mn led by US-based Falcon Edge Capital at a valuation of nearly $2.4bn, which is more than double the valuation it’s going public.
Similar to most loss-making startups, Policybazaar too has burnt through cash for advertising and promotions for a greater digital reach. Their advertising expenditure has shot up nearly 10x since FY18, from Rs.32 cr to Rs.312 cr and the revenue has grown 4x from 150cr to 600cr.
Given the vast opportunities in the acutely under-penetrated insurance market in India, there is a lot of potential for all the players in the insurance sector, more so for the online ones, like Policybazaar.
According to IRDAI’s annual report dated December 2019, the penetration of life insurance is a mere 2.74% and an abysmal 0.94% for general insurance, well below the global average.
The government seems to have taken cognizance of this fact and as a result, the decision taken by the Union Budget 2021 to increase FDI in insurance companies from 49% to 74%(which was 26% till 2015) could help further boost the sector.
