Online insurance marketplace Policybazaar plans to file its draft documents to go public in July, and eventually list by November-December at a valuation of $4-5 billion, a valuation higher than previously planned, underscoring investor interest for one of the year’s most anticipated Initial Public Offerings (IPOs), sources said.
Policybazaar’s parent Etech Aces Marketing and Consulting Pvt Ltd needs to get board approval, which it plans to do in the coming weeks, following which it will file its Draft Red Herring Prospectus with the market regulator Securities and Exchange Board of India (SEBI).
It plans to raise $400-500 million in a local listing by selling primary and secondary shares, at a valuation of $4-5 billion, said these people, who requested anonymity since these discussions are private. It hasn’t finalised how much it will raise or the primary/secondary component yet.
“They had planned to file the DRHP by now but things got delayed because of the pandemic’s second wave. Finance and legal teams are working closely with the investment bankers to file the DRHP this month, maybe in the next couple of weeks” said one person involved in discussions.
“Once they file, it needs approval from SEBI as well as IRDAI (the insurance regulator). Insurance is a highly regulated sector. Approvals will take time, so they are expecting to list by November-December,” this person added.
A Policybazaar spokesperson declined to comment.
Mint reported in February that Policybazaar is planning to raise about $400 million (Rs 4,000 crore) at a valuation of $3.5 billion. However, the valuation is now expected to be higher, led by positive investor sentiment for internet IPOs. Further, Policybazaar is currently negotiating secondary share sales at a valuation of $3.8-3.9 billion, where early investors are offloading a part of their stake.
Primary share sales, where the company issues new shares are expected to be at a higher valuation of at least $4.2 billion or so. It could further increase depending on reception from investors during roadshows.
Moneycontrol reported in February that the SoftBank and Premji Invest-backed firm is appointing Kotak Mahindra Capital, Morgan Stanley, ICICI Securities and Citi as advisors for its IPO.
For FY20, the latest fiscal for which its numbers are available, Policybazaar recorded a loss of Rs 218 crore on a revenue of Rs 515 crore, compared to a loss of Rs 213 crore on a revenue of Rs 310 crore in FY19. One person tracking the company said that its revenue has doubled and losses have come down since its last filing.
“The business fundamentally has good economics and they are well capitalised. Raising primary money is a smaller objective of the IPO. They can get a good valuation with the current market sentiment and the IPO serves as a testimony to the company’s maturity,” this person added.
Policybazaar was founded in 2008 by Yashish Dahiya, who hails from an army family and had himself planned to join the army for many years. His army background is also part of why he refused money from Chinese investors during the Doklam standoff, and was open to buying back Chinese investor Tencent’s stake recently, given Indo-China political tensions.
A graduate of IIT Delhi and MBA school INSEAD, he started up in the insurance space driven by what an unnatural industry it is and how much could be done.
“What you sell here is a promise. You are paying for a promise. And the best-case scenario here, for both parties, is if you never use the product,” he said at an industry event recently. Until it got funded by Naukri.com parent InfoEdge- its first outside investor, Policybazaar couldn’t even pay any of its 18 co-founders.
Even at a mature stage, Dahiya feels Policybazaar still has a lot of room to grow. “Currently about 6 crore families in India can afford private insurance of a meaningful kind. Only 15 percent of these families have insurance, and this 6 crore will become 15 crore in the next 10 years. That is inevitable. So the market is expanding and becoming much more meaningful now,” he said.
Last month Policybazaar also got an insurance broking licence from the Insurance Regulatory and Development Authority of India, giving it many more revenue streams. It can now sell offline, have points of presence and assist claims settlement.Policybazaar’s listing will also mark the second internet IPO for its investor- Sanjeev Bikhchandani-led InfoEdge, which was also an early backer of food delivery firm Zomato. Zomato is also slated to list in the next few months at a valuation of over $6 billion.