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India’s largest digital insurance: Policybazaar – the flagship platform –is India’s largest digital insurance marketplace, with FY20 market share of 93.4%, based on the number of policies sold through online insurance distribution platforms. It has partnered with ~48 insurers, and ~51.1m consumers have registered on its platform. It has sold ~20.7m policies on its platform and has ~10m unique transacting customers.

India’s largest credit marketplace: Paisabazaar is the largest digital consumer credit marketplace, with market share of 53.7% on the basis of FY21 disbursals. It is widely used to access credit scores, with ~22.5m consumers as of June’21. It has partnered with ~56 lenders across banks, NBFCs, and fintechs offering a wide choice of consumer credit products

Large market opportunity: Life insurance premiums via the online channel stand much lower at 1% for India v/s 5.5% for China and 13.3% for the US. For Non-Life Insurance, Gross Written Premium (GWP) as % of GDP for India stands at ~1% v/s the global avg. of 2.8%, thus providing significant growth opportunities. Low penetration (72% of the population with no insurance) would drive growth and provide a long-term structural opportunity. On the other hand, the penetration of consumer loans stands much lower at 16.7% v/s 80% in the US and 56% in China. Digital consumer lending disbursals form 22% of the total v/s 56% in the US. Improving financial literacy and rising Internet penetration would support growth in online credit platforms

Financials: The company saw a total revenue CAGR of ~34% over FY19–21, led by insurance web aggregator services (68.5% of FY21 total revenues), which grew by ~40% over FY19–21. Overall, commission income (both Policybazaar and Paisabazaar) constitutes ~36% of total revenues, while fees from outsourcing/consulting form 52%. Policybazaar reported loss of INR1.76b, while Paisabazaar turned profitable with FY21 profit of INR136m.

Issue Size: The INR56.3b IPO consists of fresh issue of INR37.5b and OFS of INR18.8b by investors. The funds raised will be utilized for marketing expenditure, offline expansion, strategic investments/acquisitions and overseas expansion.

Valuation & View: The issue is valued at 46.3x FY22 Mcap/Sales on a post issue and annualized basis, which seems expensive compared to global peers. However, the issue is likely to attract investors interest given its leadership position in both digital insurance/consumer credit marketplace and customer centric approach. Also losses are reducing at Policybazaar while Paisabazaar has turned profitable. In the current environment, market is liking such niche emerging platform stories, which is well placed to tap the high growth digital/online penetration in insurance/consumer credit market. Hence we recommend Subscribe from Listing Gains perspective.

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