IPO Size: Rs. 5,710 cr – 2/3^rd fresh issue, 1/3^rd OFS mainly by Softbank (15.8% to drop 6%) and company founders (6% to reduce to 5%)

Price band: Rs. 940-980 per share

Mcap: Rs. 44,051 cr, implying 13% dilution

IPO Date: Mon 1^st Nov to Wed 3^rd Nov 2021, Listing: 15^th Nov 2021

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

High Growth Business:

Company’s Policy Bazaar sells insurance online, while Paisa Bazaar is a direct selling agent (DSA) for loans and credit cards. Company’s revenue grew at a 34% CAGR between FY19-21 to Rs. 887 cr, with Q1FY22 revenue also up 36% YoY to Rs. 238 cr. 

Leader, yet Negative Bottomline:

Even after garnering 65% market share for all digital policies sold in India, fixed costs on employee and technology are not getting fully absorbed, and company’s net loss widened to Rs. 111 cr in Q1FY22 from Rs. 150 cr in FY21. Thus, Paisa Bazaar’s turned-around in FY21 due to lay-offs and Rs. 110 cr curtailment in advertising costs in the covid year, appears temporary. 

No near-term Path to Profitability:

Secondary market investors are not as patient with cash burn (spending Rs. 13 to earn a revenue of Rs. 10) as venture capital investors. With company investing in new business like offline, corporate and potential competition to Paisa Bazaar from ‘Account Aggregators’, positive PAT may not be likely in the near future.

Unconvincing Issue Objects:

Company is yet to utilize Rs. 1,500 cr from previous its fund raise. Diluting 8.5% to raise Rs. 3,750 cr now and park it in low-yielding fixed income instruments is financially imprudent. Objects of issue are not convincing, like acquisition, when no targets identified and going global, when India itself is highly underpenetrated, are merely ‘structuring’ the IPO to provide a future exit route to existing investors.  

Aggressive Valuation:

PB Fintech allotted shares to Falcon Q at an effective Rs. 366 per share in Feb 2021, for 2.82% stake in the company. After 9 months, asking price is 2.7x which is merely unjustified, to say the least. FY22E revenue multiple of 35x is also more than Zomato’s 28x, both of which can not be defended on fundamentals.