PB Fintech founders to reduce stake through a $140-million block deal

PB Fintech co-founders Yashish Dahiya (left) and Alok Bansal

PB Fintech (parent company of Policybazaar and Paisabazaar) co-founders Yashish Dahiya and Alok Bansal will be selling shares worth 2.4 percent of the company's capital base cumulatively in a block deal worth $130 to 140 million (over Rs 1,000 cr), the company said in an exchange filing.

The block deal will be done at a 0-2 percent discount to PB Fintech's closing price on January 10 which was at Rs 868.10 per share. Dahiya will be selling up to 70 lakh shares and Bansal will sell 38.9 lakh shares.

The founders' cumulative stake will reduce to 8.01 percent on a fully diluted basis from 10.33 percent currently. The deal will be executed on February 11.

The co-founders, along with Dahiya's wife Shika Dahiya and a few other shareholders had reduced the quantum of their stake sale in the run-up to the company's IPO in November 2021.

Moneycontrol had reported that the founders and other shareholders had changed their minds over the quantum of the stake sale due to optimism that their business will be worth a lot more post the IPO.

"This proceeds from the sale are likely to be used by the founders to make tax payments towards the ESOPs that are due," the release said.

According to data on the Bombay Stock Exchange (BSE) website, Dahiya currently holds 3.84 percent stake in the company, while Bansal holds 1.30 percent. 43.56 percent of Dahiya's total shares are locked-in as per the IPO lock up period, while none of Bansal's shares are under lock-in.

Post the listing, CEO Yashish Dahiya in an interview with Moneycontrol had said on the rationale behind reducing the stake ahead of the IPO, "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, 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," he had said.

However, analysts and industry experts believe that founders reducing stake raises concerns of an impact on investor sentiment.

An analyst told Moneycontrol on the condition of anonymity, "While the intent of the promoters is not misplaced, this may dampen investor sentiment for the stock. Because the promoters are selling a significant number of shares at a time when the stock is already under pressure."

Shriram Subramanian, Founder and Managing Director of corporate governance advisory firm InGovern Research Services said, "Any founder or promoter selling stake is a negative. But yes they may want to use the proceeds for tax repayments or personal investments. Alternatively, they could have pledged their shares and raised funds to pay off the taxes."

The company's shares had listed at Rs 1,150, a premium of nearly 23 percent over its issue price. The stock is down 34 percent currently from the date of its listing.