scalable model but brand building to deprive near term

1 | P a g e ( 3 1 s t O c t 2 1 )

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.

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 )


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 )


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

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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 (%)


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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 )


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

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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.

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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 )


PFL’s Financial Performance


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


%

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


%

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


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 )


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 )


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


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 )


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


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 )


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


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.

14 | P a g e ( 3 1 s t O c t 2 0 2 1 )


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.

15 | P a g e ( 3 1 s t O c t 2 0 2 1 )


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


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%


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

16 | P a g e ( 3 1 s t O c t 2 0 2 1 )


High growth rates to persist through the decade


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

17 | P a g e ( 3 1 s t O c t 2 0 2 1 )


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


18 | P a g e ( 3 1 s t O c t 2 0 2 1 )


Management Team


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).

19 | P a g e ( 3 1 s t O c t 2 0 2 1 )


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


20 | P a g e ( 3 1 s t O c t 2 0 2 1 )


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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scalable model but brand building to deprive near term

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