The shares of PB Fintech, the parent of insurance marketplace PolicyBazaar and lending platform PaisaBazaar, were listed at a premium of 17.35 percent at Rs 1,150 on November 15, making it the latest among a clutch of Internet companies hitting the public markets in India this year.
While its founder, chairman and CEO Yashish Dahiya is happy about the outcome, he candidly admitted that he stayed aloof from the whole IPO process. "I personally do not have a trader's mentality, I have a builder's mentality. I have never invested in a stock, the only thing I have built is Policybazaar," he says.
Dahiya, the first person in his family to not join the Army, Navy or Airforce, spoke to Moneycontrol about the growth trajectory ahead, the path to profitability, and near-term challenges. He asserted that while they are not going to be focused on profits in the near term, they will be sensible in the way they deploy capital. "Being overly frugal can be hurtful to the brand in the long term and that is not our intent," he said.
Q: Info Edge CEO Hitesh Oberoi, who has known you for 33 years tweeted after the listing that if it was anyone else, they would have given up a long time ago and gone back to London. What does this milestone (listing) personally mean for you?
A: We are very happy that as a team we managed to stay the course and build what we have. I think it's still very early days. For companies like ours, in 10 years from now either the company will be very strong or the company will not exist. It is very critical that we build an organisation that lasts into the future. So, I feel good that we've come some distance and also seem to have some very clear plans on how we will build.
Q: Do you believe that PB Fintech was always meant to have a life in the markets? Is that how you always envisioned it through all the struggles, and changes that you've had to make over the last decade?
A. With the number of private equity investors we had, over time, it was a logical conclusion that at some point, we would have to be public. Being in regulated markets. it's also good for us to be public. If I look back at our history over the last 20-25 quarters, we were quite okay in terms of being able to guide our investors. Of course, there are surprises in any business but the surprises were not that high. So, we felt we were ready now. And yes, the destination forever has been being in the public markets.
If you ask me honestly -- why? I don't have a very clear answer for why we wanted to be public, except for the fact that it was the next step. Like after you finish high school you don't know what to do next. And somebody tells you to become an engineer. Somebody says do an MBA after that. So, I guess it's a bit of that, so we kind of became public. But the reasons for why we became public are not very clear in my mind. Except for the fact that yes, our investors all seem to be very happy that we're a public company now.
Q: You along with CFO Alok Bansal also reduced the size of your offer for sale. We understand it comes from the confidence that you have in the company that you have built and you believe that it's going to give a lot more returns in the future. So, will you all be looking at reducing your shareholding at a later stage maybe?
A: Let me explain the rationale. A large part of our shareholding is in the form of employee stock ownership plan (ESOP) and every time the ESOPs come due, there is a tax due on them at 43 percent and that tax has to be paid in advance of us selling our shares. There can be some challenges around that. And for that we need money.
So, we had to, you know, plan to sell something to make sure that we were prepared to pay the tax. Now when Alok and I discussed, our worry was that if we sell now, and we pay taxes later, what happens is the price fluctuates whether up or down. It didn’t make sense to sell shares, and keep money to pay taxes which are going to be due in the future. We would rather sell those shares and collect that money just when the taxes are going to be due.
Sometime in the year, we will have some transactions and we have been quite clear about that. We cannot pay the tax by ourselves.
Q: The last time we spoke you said profitability is a choice. But now that you are a listed company, you will be scrutinised quarter to quarter. So how are you going to balance the need to make investments aggressively, grow your offline presence with the need to also evaluate a path to profitability?
A: I have been crystal clear in all my communication to at least all the 150 investors I have met that we are not going to be short term profit focused. Now that doesn't mean we are going to be inefficient. Look at the history of our organisation. We raised $150 million and built two companies out of that. Meaning about $70 million has gone a piece to building a consumer brand on the internet in India, which by today's terms is a decent outcome. So, we are going to be sensible. Being overly frugal can be hurtful to the brand in the long term and that is not our intent. Our core insurance and lending businesses have been profitable for a while. There are lots of experiments we do and we will keep doing them. Nobody has given us this valuation to deliver profits today or even tomorrow. This valuation is for what we are going to build out in the next five to 10 years and my entire focus is on that.
I have a good sense of where our business ends up in terms of profitability in five years’ time. And that's quite encouraging. But whether we are profitable next year or the year after, I have not given any guidance to any of our investors to think that. I have also in fact warned them not to have any such expectations because I will not be driven by that. We have a core business which will get more and more efficient with time. But our experiments will continue as required because our job, as I said, is not to protect the present. It is to make sure that we are relevant in the future. And that's the most critical job that I have.
Q: Talking about your core business, tell us a little more about the growth targets that you have set internally for both the credit business as well as the insurance business for the next two to three years?
A: We will continue to grow at about double the rate of the industry or at least 20 percent faster than the industry in every category. That is what our internal targets are and that's how we peg ourselves. That should be a minimum expectation from us because we are a digital business and digital is growing faster. We are quite satisfied with how it's been in the last couple of years and we are hungry for more. Let’s wait and watch. We have very strong plans for the next five years. I do not want to be very specific about those yet. But of course, in my mind I'm quite specific and that is something that has been shared within our team.
Q: One of the objectives for this IPO was also to ramp up your international presence apart from growing your core business and acquisitions. You have a presence in Dubai now. Which other markets do you see the opportunity for your core businesses?
A: There is no immediate plan to expand internationally beyond the United Arab Emirates (UAE). There is no other country that we have planned for. But there are lots of opportunities out there.
Europe has almost not transformed in the last 15 years while we've been building Policybazaar. So, there is an opportunity there, and Europe is a very big market. The Middle East, Saudi Arabia, Turkey, Egypt; and Indonesia is a pretty significant opportunity. Southeast Asia is another significant opportunity. But again, we have not decided and we may never do anything. We are not extremely keen on it, at this point our focus is building the business and strengthening our capabilities in India.
Q: What could be the challenges for both credit as well as insurance that can come in the way of innovation and your growth plans?
A: The strategic challenges I see over the next three years are on two fronts -- one is how the ecosystem evolves on claims. What that implies is that consumers should get an auto adjudicated experience on claims so that this whole issue of will I get a claim or will I not is taken out of the picture. The customer should get a seamless and standard service whichever company they buy an insurance policy from. That is a very critical area of development for us. As it happens, it will develop the whole industry and of course, we will be a beneficiary of that. The second part is customer onboarding experience which is a very difficult industry.
There are tactical tasks and strategic tasks. Tactical are things that have already been done or are put in motion and will happen automatically. And then there is strategic tasks or risks, which may or may not happen. So these are the areas I think are our strategic risk areas that I am very focused on to make sure that we evolve both as an industry and as a company, making sure our customers get a better experience and the claims handling is better. That applies for credit as well. Even today to get a credit card people have to go and pick up documents, etc. All that needs to be streamlined. We need to have more of a digital process.
Q: Do you see any challenges from the regulatory standpoint?
A: We have a clear line as far as the regulatory guidance and regulations are concerned. We are quite happy with those. Of course, we would expect access to digital links to be available to the consumer from whichever window they came from. That's a critical part of development for the entire country's ecosystem that these digital links are being built out. The consumer can access their own data from whichever platform they choose.
Q: What is your biggest takeaway or learning from taking a company public?
A: I think I never understood these things like HNI liquidity, etc and it is good that now I am coming across these terms. I personally do not have a trader’s mentality, I have a builder’s mentality. I have never invested in anything, I have never invested in a stock, the only thing I have built is Policybazaar. I am not an investor in any startup simply because I don't have that mentality of thinking about the value increase, etc. I don't think that way, I just think it's something useful to build and then keep building.So it (listing) has been a different experience for me. Quite honestly, I stayed quite aloof from it. It is Alok who has run the entire IPO process and we are very lucky to have somebody as strong and thoughtful as Alok because he and his team have protected the rest of the company from the IPO process. Nobody else in our company really knows the process going on. Of course, they hear about it in the news, but that's it and I think we're very happy to have that. Yes, it’s dawning on us that we have a large responsibility. I was told we have about a million people who subscribed and about four lakh people who currently hold shares in our company. We are humbled by that responsibility. We are grateful to all those people who believe in us. But besides that, quite honestly being public etc. don't mean too much.