Why Policybazaar Share Price is Falling

The world of tech stocks has turned ugly and the worst may be yet to come.

Indian tech stocks were a rage last year. Every investor wanted to participate in the IPOs of these companies.

The time since then has left investors disappointed. These stocks are no longer the favourites of Dalal Street.

Zomato, Paytm, Nykaa...every other day, it appears these stocks have bottomed out but the next day, investors are in for a nasty surprise with yet another fall.

Among the companies which came out with big IPOs last year, one prominent name was PB Fintech, the parent company of PolicyBazaar. It was the third big tech-focused firm to list, after Zomato and Nykaa.

Shares of PB Fintech started on the bourses last year with a decent premium of 17% on listing day.

The journey since then has been painful for investors. Since listing, the stock is down 67%.

India's largest online insurance company Policybazaar is facing the wrath of investors. They blame the share price fall on the company's poor execution and valuation.

We analyse what went wrong with it.

#1 Lock-in period ending soon

In the past couple of months, you must have seen a lot of new age tech stocks tumbling down on the bourses.

While valuation for these loss making companies was always a concern, another factor driving these stocks lower was their lock-in period. The mandatory lock-in period of one year is applicable for companies with zero promoter holding.

During this period, shareholders allotted stocks pre-IPO cannot sell the shares in the open market. The category includes promoters, employees, and institutional shareholders. Basically, the insiders and the smart money.

Now for a high potential business, you would expect insiders and institutional money to either lap up more shares or wait for better exit levels.

However, this didn't happen with Zomato or Paytm as shareholders of these companies were in a rush to exit.

Uber Technologies sold its entire stake of 7.78% in Zomato. Another pre-IPO investor Moore Strategic Ventures exited. Investment firm Tiger Global too pared down its stake in the company to almost half.

Zomato shares crashed 20% when these investors exited.

The share price of Paytm also witnessed the same fate upon expiry of its lock in period in December 21.

For Policybazaar, its pre-IPO shareholders' lock-in period expires on 15 November 2022, one year after listing.

Around 28 million shares will be opening up on 15 November 2022, along with 4 million shares that were already unlocked for AIF / FVCI investors. This will substantially increase the free float for Policybazaar.

So, if big investors sell stake on lock-in period ending date, shares of Policybazaar could see a sharp downfall.

According to a Livemint article, some institutional investors including Premji Invest are already looking to sell shares worth at least Rs 20 bn in Policybazaar upon expiry of the one-year lock-in period.

He silver lining here is that Policybazaar is lining up buyers for the expiry in November so that it doesn't see a sharp fall.

#2 Weak financial position

Policybazaar continues to be a loss-making firm. Despite growing revenues to a great extent, the company has over the years increased losses.

As of financial year 2022, the company is saddled with losses to the tune of over Rs 8 bn.

Financial Snapshot of PB Fintech

Rs m, consolidated	FY18	FY19	FY20	FY21	FY22
Revenues	3,339	4,922	7,713	8,867	14,249
Growth (%)	82%	47%	57%	15%	61%
Total Expenditure	3,864	8,516	10,911	10,463	23,270
Operating Loss	-261	-3,228	-2,355	-889	-7,768
Net Loss	-592	-3,442	-3,040	-1,502	-8,329

Data Source: Ace Equity

On a quarterly basis too, the company didn't have anything exceptional to report. In the June 2022 quarter, the company's losses widened to Rs 2 bn from 1.1 bn. This was due to higher employee and advertising and promotion expenses.

Revenues, as usual, saw a spike and doubled to Rs 5.1 bn from Rs 2.4 bn.

Global brokerage house Morgan Stanley has raised concerns on the slower growth in core insurance premiums, led by weaker growth in retail protection and motor insurance segments.

Performance of Policybazaar since listing

PB Fintech made a decent debut on the bourses in November last year by gaining 17% on the first day.

Since then, the stock only had one way to go. PB Fintech trades 67% lower from its IPO price.

PB Fintech has a 52-week high quote of Rs 1,470 touched on 17 November last year and a 52-week low quote of Rs 373 touched on 21 October 2022.

In the past one month, shares of the company are down 20%.

The company is a zero promoter holding entity. Mutual funds hold 2.5% stake in Policybazaar as of June 2022.

To know more, check out Policybazaar's latest shareholding pattern.

About Policybazaar

PB Fintech, popularly known as Policybazaar, is India's largest online platform for insurance and lending products through its flagship brands - Policybazaar and Paisabazaar platform. Through these they provide convenient access to insurance, credit, and other financial products.

The company is India's largest digital consumer credit marketplace with a 51.4% market share, based on disbursals in fiscal 2020.

To know more, check out Policybazaar's financial factsheet and its latest quarterly results.

You can also compare it with other new age tech stocks:

Policybazaar vs Zomato

Policybazaar vs Paytm

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...