Equity Research INDIA

April 18, 2022

BSE Sensex: 58339
PB Fintech BUY
ICICI Securities Limited
is the author and Leading insurance intermediary; growth trajectory
distributor of this report
should stand out Rs776
Initiating coverage PB Fintech (PBF) is among the leading insurance and lending intermediaries in India.
It operates principally through its platforms PolicyBazaar/PaisaBazaar, and has also
Diversified entered into newer businesses. PBF is well placed to benefit from the rising
insurance penetration in India, especially through digital distribution. High growth,
financials operating leverage, strong balance sheet and established brand recall among the
Indian populace are its key business moats. This should help the company generate
Target price: Rs940 strong free cashflows as we expect its cost-to-income ratio to plateau ahead. Initiate
with BUY and a DCF-based target price of Rs940.
Shareholding pattern
Sep Dec  Business model to enjoy higher growth than other insurance players. The prime
’21 ’21
Promoters 0.0 0.0
growth driver for PBF should be in the increasing premium income expected in digital
Institutional medium. Individual new business premium (life) and retail health insurance sourced from
investors 24.2 25.7
MFs and others 2.4 2.2
online channels (web aggregators + insurer websites) grew at 38% CAGR in FY16-FY21
FI/Banks 0.5 0.0 vs 12% for non-digital channels. New business premium income for PBF has grown at
Insurance Cos. 0.7 0.8
FIIs 20.6 22.7
26% CAGR vs the 11% witnessed by industry between FY19-FY21. Based on industry
Others 75.8 74.3 estimates, premium via online channels stood at US$1bn for India representing 1% of
Source: NSE total FY20 premium which is significantly lower than the US (13%) and China (5.5%).
Price chart  Renewal book to ensure high operating leverage. The long-tail nature of insurance
business drives high operating leverage as renewal book typically should not call for any
1600
1400 additional cost and ideally be operating at near-100% contribution margin. We expect
1200 the core renewal book to clock 39% CAGR between FY22-FY31E and the revenue and
1000
contribution CAGRs from renewals to be 33% and 35%, respectively by FY31E.
(Rs)

800
600
400
 New initiatives can crowd out competition. The insurance agent, on being boarded
200 through PBF’s portal PB Partner, helps grow retail insurance premiums manifold (Q3/Q4
0 volumes were at Rs2.4bn/5bn). Although its contribution on quarterly basis is currently
17-Jan

28-Feb
7-Feb
15-Nov

27-Dec
6-Dec

21-Mar
11-Apr

negative (loss of Rs400mn in Q3FY22), the volumes gained through PB Partner will
fortify PBF’s industry position among insurance OEMs as well as peer intermediaries.
 Cost overrun is the only risk, but at with total advertising/promotion expenditure
at Rs2.4bn in Q3FY22, the cost-to-income ratio is expected to plateau ahead. We
expect the ratio to gradually dip from 107% in FY21 to 81% in FY26E.
 Estimate consolidated FY26E Adjusted EBITDA at Rs10.2bn; recommend BUY
with DCF-based target price of Rs940. The key construct of our assumptions is: 27%

CAGR in new premiums in PBF’s core business. This would automatically lead to 39%
growth in renewal premium during FY22E-FY31E. As for the company’s lending platform
PaisaBazaar, we expect it to clock 30% contribution CAGR between FY21-FY31E. We
model the other initiatives (PB Partner and PB Corporate, plus international business)
separately and they contribute ~12% to our valuation.
Market Cap Rs349bn/US$4.6bn Year to Mar FY22E FY23E FY24E FY26E
Research Analysts: Bloomberg POLICYBZ IN Premium (Cons) (Rs mn) 69,750 122608 189,846 442,166

Ansuman Deb Shares Outstanding (mn) 449.5 Growth 48% 76% 55% 50%
[email protected] 52-week Range (Rs) 1448/644 Disbursal (Rs mn) 66,070 82,588 103,234 154,852
+91 22 6807 7312 Free Float (%) 100.0 Growth 127% 25% 25% 20%
Ravin Kurwa FII (%) 22.7 Revenue (Rs mn) 12,742 18,952 26,685 54,709
[email protected]
+91 22 6807 7653 Daily Volume (US$/'000) NA Contribution (Rs mn) 2,312 841 2,189 15,474
Absolute Return 3m (%) (15.5) Margin (%) 18.1 4.4 8.2 28.3
Absolute Return 12m (%) NA EBITDA (Adj) (Rs mn) -2,958 -3,996 -2,778 10,245
Sensex Return 3m (%) (4.6) Margin (%) -23.2 -21.1 -10.4 18.7
Sensex Return 12m (%) 21.4 Adj PAT (Rs mn) -2,373 -960 -759 12,579

Please refer to important disclosures at the end of this report

 PB Fintech, April 18, 2022 ICICI Securities

TABLE OF CONTENT

PB Fintech (PBF) is poised for high growth in premiums and, in turn, revenues .... 3
India insurance under-penetration ensure high-growth outlook ..................................... 3
Rising digital share of distribution will help PBF outperform industry growth ................. 5
Indian insurance commission is a big market opportunity .............................................. 8
Estimating PBF’s premium trends ................................................................................. 10
Renewal nature of insurance offers high operating leverage ................................... 11
Aggregate nature of business makes PBF the most diversified proxy on Indian
insurance ........................................................................................................................ 13
PB Fintech (PBF) enjoys strong brand recall ............................................................. 15
New initiatives to provide growth optionalities .......................................................... 18
Experienced management can be a big differentiator ............................................... 20
PaisaBazaar to also benefit from growth outlook in digital consumer lending ...... 22
Consumer lending business is one of the lowest credit penetrated segments ............. 22
We estimate Rs10.2bn EBITDA (adj) by FY26E driven by strong growth outlook .. 25
Organisation structure .................................................................................................. 26
Valuation ......................................................................................................................... 27
Key risks ......................................................................................................................... 28
Financial summary ........................................................................................................ 29
Index of Tables and Charts ........................................................................................... 31

2
 PB Fintech, April 18, 2022 ICICI Securities

PB Fintech (PBF) is poised for high growth in

premiums and, in turn, revenues
India insurance under-penetration ensure high-growth outlook

Chart 1: Based on life insurance premium as % of Chart 2: But in terms of premium density (premium
GDP, India is largely in line with global average per capita), 4x growth is possible if we compare the
penetration level with China
25 12000
19.2 8983
20 9000
15

US$
8.8 6000
10 3574
5.8 5.1 232919591918
3.3 3.2 3 2.8 2.4 2.3 1.5 3000 1281
5 0.8 691 360 349 241 151 59
0 0

JAPAN

FRANCE

GERMANY

WORLD

CHINA
UK

US

AUSTRALIA

BRAZIL

INDIA
NEW ZEALAND
GERMANY
JAPAN

FRANCE

WORLD

US
UK

CHINA

AUSTRALIA
INDIA

BRAZIL

NEW ZEALAND

HONG KONG
HONG KONG

Source IRDAI Source IRDAI

Chart 3: India has one of the highest mortality gaps Chart 4: …suggesting significant headroom for
(Protection required less Sum insured)… protection opportunity over the next decade

Protection Gap % Sum Assured % OF GDP

83% 350%
76% 74%
71% 70% 300%
61% 250%
55% 55% 54%
41% 200%
150%
100%
50%
0%

India @ 20%
Japan

USA

India @ 25%

South Korea
Singapore

India (Current)
Malaysia

Thailand
Japan

Hong Kong
India

Indonesia

Malaysia

Thailand

China

Australia
South Korea
Singapore

CAGR*

CAGR*

Source: Swiss Re, Closing Asia’s mortality protection gap, 2020. Source: IPRU Investor presentation
*CAGR implies growth of sum assured between FY21-FY35 and GDP
CAGR of 10% between FY21-FY30 and 8% between FY30-FY35.

3
 PB Fintech, April 18, 2022 ICICI Securities
Chart 5: Health insurance penetration in 2019 (gross Chart 6: Health insurance density is also low, thus
direct premium as % of nominal GDP) indicating scope for growth
4.5%
3,000

2,679
4.0%

4.1%
2.7%
3.5% 2,500

2.3%
3.0% 2,000

1,095
1,052
2.5%

US$
1,500
2.0%

0.9%
0.8%
1,000

0.6%
0.6%
1.5%

0.6%

264
258
0.4%

242
0.4%
0.4%
0.2%
0.2%

122
0.2%

1.0%
0.1%
0.0%

500

91
77
66
39
33
22
20
5
2
0.5%
0
0.0%

India

Japan

Germany
Russia

Mexico
China

United Kingdom
Indonesia

Argentina

Italy

United States
Turkey
Australia

Israel

Spain

France
India
Japan
Russia

China

Germany
Italy
Mexico

United Kingdom
Indonesia
Australia

Turkey

United States
Argentina

France
Israel

Spain

Source: OECD, World Bank Source: OECD, World Bank

Chart 7: Out-of-pocket expenditure as % of current Table 1: Motor segment penetration also remains
healthcare expenditure is high compared to global low largely led by 2-wheeler segment
markets
India Low Middle Income Total number of Total vehicles on Uninsured
policies (mn) road (mn) proportion
Middle Income World
80 FY17 90.6 194.4 53%
70 63 FY18 96.1 211.1 54%
FY19 98.4 231.2 57%
60
56
50
40
37
30
20 18
10
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

Source: NITI AAYOG report Source: Industry data (Link)

Note: For low middle income and middle income, numbers are based on Note: Uninsured proportion is high in the 2-wheeler segment (66%)
selected aggregates. followed by private cars (11%)

4
PB Fintech, April 18, 2022 ICICI Securities

Rising digital share of distribution will help PBF outperform

industry growth
Digital insurance marketplace is playing a key role in distribution of insurance products
in India. In FY20, PolicyBazaar was India’s largest digital insurance marketplace with
93.4% market share in terms of the number of policies sold. Also, 65.3% of all digital
insurance sales in India in FY20 happened through PolicyBazaar.

Table 2: Online premium mix as % of total premium; India has a long growth
road ahead
2020 Unit India US China
Premium via Online Channel US$ billion 1.0 208.0 35.5
As % of Total Premium % 1.0% 13.3% 5.5%
Source: Frost & Sullivan Analysis

PolicyBazaar’s addressable market has largely been individual life insurance, retail
health, and motor insurance. Between FY16-FY21, individual life new business premium
(NBP) and retail health premiums witnessed 15% CAGR while premium sourced from
web aggregators’ and insurers’ own websites have seen 47% CAGR. This has resulted
in overall online premium share to grow from 0.8% in FY16 to 2.7% in FY21.

Table 3: Online channels (Retail - Life and Health) and PB Fintech (PBF) have outgrown the industry
Rs bn FY15 FY16 FY17 FY18 FY19 FY20 FY21 CAGR CAGR
(FY16- (FY19-
21) 21)
Industry Individual NBP premium (Life) (Rs bn)
Web-Aggregators Premium - 0 0 1 2 3 4
Online Premium (sourced from Insurer website) - 3 4 5 11 15 18

Industry Individual health premium (Rs bn)

Direct Sale online (sourced from Insurer website) 2.3 2.1 2.9 3.6 4.0 4.2 8.7
Web- aggregators premiums - 0.2 0.5 1.7 2.9 4.9 6.6
Total 2.3 5.3 8.1 11.0 19.6 26.5 37.2 38% 38%
FY15 FY16 FY17 FY18 FY19 FY20 FY21
Total Individual NBP 554 583 777 921 977 1,016 1,139
Total Retail Health 88 104 126 153 175 200 258
Total Premium 642 687 903 1,074 1,152 1,216 1,397 13% 10%
Share of digital channel 0.4% 0.8% 0.9% 1.0% 1.7% 2.2% 2.7%

FY15 FY16 FY17 FY18 FY19 FY20 FY21

Offline channel (Life) 554 580 773 916 964 999 1,117
Offline channel (Health) 85 101 122 148 168 190 243
Total 639 682 895 1,063 1,133 1,189 1,360 12% 10%
FY15 FY16 FY17 FY18 FY19 FY20 FY21
PB Fintech NBP (incl protection, savings, health,
motor and others) 17 26 27 26%
PB Fintech renewal 6 11 20 81%
Total premium 23 38 47 43%
Source: IRDAI and Company

5
 PB Fintech, April 18, 2022 ICICI Securities
Table 4: Core PolicyBazaar has only 6% market share in the overall retail premium market (ex-
savings). If it expands up to 25% in next decade, PB can clock 40% CAGR.
Industry Premium Core PB Premium
CAGR Market Market CAGR
(FY21- share share (FY21-
Premium Rs bn FY21 FY31E 31) FY21E (FY21E) FY31E (FY31E) 31E)
Protection new business premium 36 333 25% 10.0 28% 133 40% 30%
Retail Health GDPI 258 2,401 25% 9.0 3% 600 25% 52%
Motor GDPI (2W / 4W) 226 916 15% 13.3 6% 183 20% 30%
Total Addressable market for PBF (ex-savings) 520 3,650 22% 32.3 6% 917 25% 40%
Source: IRDAI, I-Sec research.
Note: Term premium is based on protection APE reported by key insurers like HDFC Life, SBI Life, IPRU Life, Kotak Life, Tata AIA, Max Life
and LIC. *PB premium is our estimate of term premium (ex-renewal) and annual retail and Motor GDPI premium.

We have also estimated Core PB’s premium CAGR by assuming a higher penetration
of premiums sourced online. We have assumed total premium of Indian Insurance
sector to grow at 15% CAGR between FY21-31E and share of online premiums to
increase from 1% to 20% and estimated market share of core PB declines from 64% to
50%

Table 5: Core PB premiums can witness 53% CAGR between FY21-31 if industry
.online premium penetration increases from 1% to 20% while Core PB market
share declines from 64% to 50%
Rs bn FY21 FY31E CAGR
Life Premiums 6,287 23,157 14%
Life - NBP 2,787 11,275 15%
Life - Renewal 3,500 11,882 13%
Non-Life Premium 1,987 10,402 18%
Total Premiums 8,275 33,559 15%
Premium via online channel 73 6,712 57%
% Premium of total insurance market 1% 20.0%
Core PB premium 47 3,356 53%
Core PB Market share 64% 50%
Source: IRDAI, I-Sec research

Table 6: Market share of PolicyBazaar in terms of number of policies issued

mn
Total policies sold by online insurance distribution platforms in FY20 (A) 6.14
Total policies sold on PolicyBazaar platform FY20 (B) 5.73
PolicyBazaar market share (B/A) 93%
Total policies sold online directly by insurance companies and by insurance
distributors in FY20 (C) 8.8
PolicyBazaar market share (B/C) 65%
Source: Company RHP

Table 7: PolicyBazaar revenues have grown at a rapid pace…

CAGR (FY19-
Revenues (Rs mn) FY19 FY20 FY21 FY21)
Insurance commission 1,317 2,134 2,591 40%
Outsourcing services 1,518 2,568 2,994 40%
Rewards 267 456 484 35%
Total 3,102 5,158 6,069 40%
Source: Company RHP

6
 PB Fintech, April 18, 2022 ICICI Securities
Chart 8: … led by healthy premium growth Chart 9: … and growth in agent productivity

Total Premiums Premium per advisor ( in lakhs)

80,000 16 14.6
69,750 14
70,000 14

60,000 12

50,000 47,013 10 9
Rs mn

37,586 8
40,000
6
30,000 6
23,157
20,000 4

10,000 2

- 0
FY19 FY20 FY21 FY22 FY19 FY20 FY21 9MFY22
Source: Company data Source: Company data

Chart 10: Growth in PB’s sum assured has been Table 8: PolicyBazaar is the most downloaded app
strong in past three years amongst peers
Company APP Downloads
Sum assured Rs bn
PolicyBazaar +10mn
8,000
InsuranceDekho +50T
7,000
Coverfox +0.1mn
6,000 2,385 Turtlemint +1mn
5,000
893
4,000
3,000 653

2,000 4,633
3,925
2,895
1,000
0
FY19 FY20 FY21

Life Non-life

Source: Company data Source: Google Play store

7
 PB Fintech, April 18, 2022 ICICI Securities

Indian insurance commission is a big market opportunity

 India’s FY21 insurance commission market stood at Rs484bn (life and non-life
combined). Total commission from insurers has grown at 10% CAGR, of which
commission from life insurers has risen 9% and non-life 12% between FY19-FY21.
Ex-LIC, commission CAGR has been 12% in the same period.
 Amongst life insurers, NBP take rate for LIC has declined from 6.52% in in FY19 to
5.82% in FY21 while that for private insurers has been largely stable at 8.3%.
Renewal commission take has remained stable for both LIC and private insurers at
5.2% and 2.3% respectively in the same period.
 For non-life insurers, the take rate has increased from 7.25% in FY19 to 7.75% in
FY21. This could largely have been due to rising health GDPI mix. Health GDPI
commission take rates have increased from 8% in FY19 to 9.1% in FY21 driven by
strong GDPI growth registered by SAHI.
Chart 11: FY21 Commission market share (life and non-life)

Life - Pvt Life,

22%
Non-Life, 32%

Life - LIC, 46%

Source: IRDAI

Table 9: Non-life insurance commission market has witnessed 12% CAGR between FY19-FY21
PSU Private SAHI Sp Ins Total
Rs bn FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21
Fire Commission 6 8 10 6 8 11 0 0 0 0 0 0 12 15 21
Growth (%) 2 26 26 30 34 42 0 0 0 0 0 0 13 30 34
CER (%) 12 11 12 9 9 9 0 0 0 0 0 0 10 10 10
Marine Commission 2 2 1 2 2 2 0 0 0 0 0 0 3 4 3
Growth (%) 5 5 -9 22 7 -2 0 0 0 0 0 0 14 6 -5
CER (%) 10 10 9 11 10 10 0 0 0 0 0 0 10 10 10
Motor Commission 20 23 21 29 37 34 0 0 0 0 0 0 49 60 55
Growth (%) -11 18 -8 42 24 -6 0 0 0 0 0 0 15 22 -7
CER (%) 7 9 9 8 8 8 0 0 0 0 0 0 8 9 8.2
Health Commission 15 16 19 12 14 18 14 18 21 0 0 0 41 49 58
Growth (%) -3 10 15 26 20 25 43 29 17 0 0 0 18 20 19
CER (%) 6 6 6 8 9 9 12.4 12.6 13.6 0 0 0 8 9 9.1
Others Commission 8 6 7 10 5 9 0 0 0 0 0 1 18 12 17
Growth (%) 37 -27 14 158 -44 75 0 0 0 1 198 73 81 -34 44
CER (%) 8 5 7 5 3 4 0 0 0 0 0 1 5 3 4
Total Commission 50 55 58 58 65 74 14 18 21 0 0 1 123 139 154
Growth (%) -1 9 6 47 13 13 43 29 17 1 198 73 22 13 11
CER (%) 7.34 7.48 8.10 7.15 7.22 7.54 12.43 12.59 13.55 0.17 0.40 0.54 7.25 7.35 7.75
Source: IRDAI

8
PB Fintech, April 18, 2022 ICICI Securities
Table 10: Life insurance commission market has witnessed 9% CAGR between FY19-FY21
LIC PVT Total
(Rs bn) FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21
1st year Commission 88 97 90 58 63 68 146 161 158
Growth (%) 6.85 10.36 -7.63 13.99 9.04 7.99 9.58 9.83 -1.46
CER (%) 28.09 16.76 26.44 13.88 13.57 14.6 19.96 15.38 19.57
Single Premium Commission 88 97 90 58 63 68 146 161 158
Growth (%) 6.85 10.36 -7.6 13.99 9.0 8.0 9.58 9.83 -1.5
CER (%) 28.09 16.76 26.44 13.88 13.57 14.6 19.96 15.38 19.57
NBP Commission 93 110 107 62 72 78 155 183 185
Growth (%) 6.02 9.31 -2.8 17.45 5 8 10.32 7.58 1.6
CER (%) 6.52 6.19 5.82 8.54 8.91 8.28 7.21 7.04 6.65
Rewards Commission - 9 12 - 4 4 - 13 16
Growth (%) 0 - 35.3 0 0 3.43 0 0 26.0
CER (%) 0 0.5 0.65 0 0.45 0.4 0 0.48 0.57
Renewal Commission 101 103 114 22 26 30 123 129 145
Growth (%) 5.75 2.81 10.6 23.67 16.88 16.16 8.6 4.27 11.7
CER (%) 5.15 5.14 5.23 2.27 2.31 2.3 4.19 4.08 4.13

Total Commission Commission 190 214 222 84 98 108 278 312 330
Growth (%) 5.88 12.41 3.7 19.03 16.41 10.31 9.55 12.31 5.8
CER (%) 5.73 5.63 5.5 4.94 5.07 4.8 5.47 5.44 5.25
Source: IRDAI

9
 PB Fintech, April 18, 2022 ICICI Securities

Estimating PBF’s premium trends

For estimating PBF’s premium income, we have modelled four segments separately,
viz. PolicyBazaar, PB Partner, PB Corporate and UAE

Table 11: Driven by increasing penetration levels and rising digitalisation, we expect PBF to clock
>40% CAGR in its total premiums
Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E CAGR
PBF (Core operations) -
NBP 34,464 44,239 58,058 76,062 99,658 1,26,264 1,57,075 1,92,499 2,34,740 2,86,489 27%
PBF (Core operations) -
Renewal 23,726 42,527 62,387 88,081 1,21,323 1,64,235 2,16,871 2,80,472 3,56,303 4,47,506 39%
POSP 7,450 25,000 40,000 60,000 84,000 1,17,600 1,64,640 2,14,032 2,78,242 3,47,802 53%
PB Corp 2,870 8,610 25,830 64,575 1,29,150 1,93,725 2,71,215 3,79,701 4,93,611 6,41,695 nm
Total 69,750 1,22,608 1,89,846 2,94,075 4,42,166 6,12,270 8,23,381 10,84,358 13,84,963 17,51,075 43%
Source: I-Sec research

Estimating PolicyBazaar’s contribution from core business

For calculating the contribution margin for PolicyBazaar platform, we have assumed
100% margins on the renewal commission post FY25E and factored the NBP
contribution margin to grow gradually given the operating leverage benefits. We expect
standalone premium to grow at 33% CAGR between FY22-FY31 driven by 27% CAGR
for new business premiums and 39% CAGR in the renewal book.

Table 12: We estimate contribution to clock 32% CAGR over the next decade
Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E CAGR
Total Premium 58,190 86,766 1,20,445 1,64,143 2,20,980 2,90,500 3,73,946 4,72,971 5,91,043 7,33,995 33%
Growth 24% 49% 39% 36% 35% 31% 29% 26% 25% 24%
of which NBP 34,464 44,239 58,058 76,062 99,658 1,26,264 1,57,075 1,92,499 2,34,740 2,86,489 27%
Growth 23% 28% 31% 31% 31% 27% 24% 23% 22% 22%
Of which Renewal 23,726 42,527 62,387 88,081 1,21,323 1,64,235 2,16,871 2,80,472 3,56,303 4,47,506 39%
Growth 24% 79% 47% 41% 38% 35% 32% 29% 27% 26%

Total Revenue from policy 9,388 11,965 15,540 20,192 27,343 34,774 43,583 53,903 66,203 81,120 27%
Growth 54% 27% 30% 30% 35% 27% 25% 24% 23% 23%

Rate (%) 16.1 13.8 12.9 12.3 12.4 12.0 11.7 11.4 11.2 11.1
Contribution 3,516 4,786 6,216 8,003 13,156 16,962 21,509 26,890 33,272 44,036 32%
Margin 37% 40% 40% 40% 48% 49% 49% 50% 50% 54%
Source: I-Sec research

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 PB Fintech, April 18, 2022 ICICI Securities

Renewal nature of insurance offers high operating

leverage
We expect FY22E renewal book at Rs23.7bn and grow to Rs447bn by FY31E (CAGR
of 39%). Despite lower take rate in renewals, premium remains highly profitable as very
low cost is involved.

PB Fintech (PBF) aggregates and distributes insurance and personal credit products
and does not carry any corresponding underwriting or credit risks. As the PolicyBazaar
platform and consumer cohorts continue to develop, larger proportion of consumers will
buy either unassisted or with reduced levels of assistance, which will improve overall
capital and operational efficiencies.

Chart 12: We expect PBF’s renewal book to Chart 13: … and revenues to grow at 30% CAGR
grow at 38% CAGR…

PB (Core operations) - Renewal Premium Renewal revenue Rs mn)

5,00,000 Renewal contribution (Rs mn)

4,50,000 25000
4,00,000
3,50,000 20000
3,00,000
2,50,000 15000
2,00,000
10000
1,50,000
1,00,000 5000
50,000
- 0
FY27E

FY22E
FY22E

FY23E

FY24E

FY25E

FY26E

FY28E

FY29E

FY30E

FY31E

FY23E

FY24E

FY25E

FY26E

FY27E

FY28E

FY29E

FY30E

FY31E
Source: I-Sec research Source: I-Sec research

Chart 14: Contribution mix of NBP and renewal Chart 15: Cost-to-income ratio (consolidated levels)
revenues

NBP Contribution (Rs mn) Adjusted EBITDA Cost to Income ratio

Renewal contribution (Rs mn)
50,000 50% 60,000 180%
Share of Renewal premium (RHS)
45,000 45% 160%
50,000
40,000 40%
140%
35,000 35% 40,000
30,000 30% 120%
25,000 25% 30,000
Rs mn

100%
20,000 20%
20,000 80%
15,000 15%
10,245 60%
10,000 10%
10,000
5,000 5% 40%
- 0% -
20%
FY22E

FY23E

FY24E

FY25E

FY26E

FY27E

FY28E

FY29E

FY30E

FY31E

FY19
FY20
FY21

FY25E

FY28E

FY31E
FY22E
FY23E
FY24E

FY26E
FY27E

FY29E
FY30E

-10,000 0%

Source: I-Sec research Source: I-Sec research

11
 PB Fintech, April 18, 2022 ICICI Securities
Chart 16: PBF consumer cohort of total Chart 17: PBF consumer cohort of total premium
premium from health insurance from Motor insurance

Source: Company RHP Source: Company RHP

Note: Represents premium and excludes premium from any add on Note: Represents premium and excludes premium from any add on products
products indexed as 1.0 in the first year of the cohort indexed as 1.0 in the first year of the cohort

12
PB Fintech, April 18, 2022 ICICI Securities

Aggregate nature of business makes PBF the most

diversified proxy on Indian insurance
PBF is uniquely placed to benefit from both life and non-life insurance in India. This
aggregate nature provides valuable diversification.

Chart 18: Estimated mix of total premium (FY21): PBF is a play on both life and
non-life insurance

Others, 4%

Protection, 23%
Health, 19%

Motor, 28% Savings, 26%

Source: I-Sec Research

Chart 19: Revenue mix of insurers is also widely spread

HDFC Standard Life
Max Bupa Health
Insurance Company
Insurance Company
Limited, 21%
Limited, 2%
New India
Assurance Company
Limited, 2%
TATA AIA Life
Apollo Munich Others, 20%
Insurance Company
Health Insurance
Limited, 12%
Company Limited,
2%
Royal Sundaram
Alliance Insurance
Company Limited,
3%
Star Health & Allied
Insurance Company
Limited, 3% ICICI Prudential Life
Insurance Company
HDFC ERGO Limited, 11%
General Insurance
Company Limited,Religare Health Bajaj Allianz Life Max Life Insurance
3% Insurance Company Insurance Company Company Limited,
Limited, 5% Limited, 7% 9%
Source: Company data

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 PB Fintech, April 18, 2022 ICICI Securities
Table 13: Insurer-wise revenue contribution in PolicyBazaar (FY20)
Outsourcing
Rs mn Rewards Telemarketing Total % Contribution
services
HDFC Life 1,046 - 56 1,102 21.1%
TATA AIA Life 315 48 242 605 11.6%
IPRU Life 300 42 210 552 10.6%
Max Life 291 - 158 449 8.6%
BALIC 351 - - 351 6.7%
Religare 54 46 155 256 4.9%
HDFC Ergo GI - 39 135 174 3.3%
Star Health - 39 130 169 3.2%
Royal Sundaram GI - 10 77 138 2.6%
Apollo 7 28 93 128 2.5%
New India - 29 97 126 2.4%
Max Bupa 5 28 94 126 2.4%
BAGIC 36 - 69 105 2.0%
IFFCO - 19 73 92 1.8%
Oriental - 18 60 77 1.5%
United India - 15 48 63 1.2%
TATA AIA GI - 14 49 63 1.2%
Universal 10 11 37 58 1.1%
Aegon 54 - 3 57 1.1%
Cigna 8 10 36 54 1.0%
National - 14 35 49 0.9%
Others 91 47 277 429 8.2%
Total 2,568 456 2,134 5,223
Source: Company MCA fillings

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PB Fintech, April 18, 2022 ICICI Securities

PB Fintech (PBF) enjoys strong brand recall

Strong, consumer-friendly brands offering wide choice, transparency
and convenience
As per Frost & Sullivan, PolicyBazaar is a household name for insurance and is one of
the most trusted insurance brands in India. The brand strength is also reflected in the
fact that, in FY21, 83.0% of the policies sold on PolicyBazaar and 66.0% of loans
originated on PaisaBazaar were to consumers who came to the platform/s directly or
through direct online brand searches.

Chart 20: Salient features of the PolicyBazaar platform

Source: Company data

Note:
1.Consumers registered on PolicyBazaar platform as of 31st Dec’21
2.Cumulative number of unique consumers who bought at least one product on PolicyBazaar since its inception
till 31st Dec’21
3.Cumulative number of new life and non-life insurance policies sold and non-life insurance renewals on
PolicyBazaar since its inception till 31st Dec’21

Other salient features of the platform

 Insurance partners (life plus non-life insurers): 48
 Unassisted transactions
o 4-wheeler: 55%
o 2-wheeler: 99%
 83% of the premium sourced was through consumers coming to PolicyBazaar
platform directly or through direct online brand search
 Near-monopoly in insurance marketplace related to online aggregators: >90%
market share

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 PB Fintech, April 18, 2022 ICICI Securities
Table 14: How PolicyBazaar is helping mitigate the problems faced by stakeholders in India insurance
sector
Problem Solution provided by Benefits to the insurer Benefit to the consumer
PolicyBazaar
Dependence on high-cost Go-to digital insurance Low customer acquisition Consumer-friendly user
physical distribution platform in India cost experience
Information asymmetry Better consumer data / High-quality consumer Superior product selection
product transparency disclosures
Blanket portfolio underwriting Data-based personalised Claims cost optimisation Better prices for low-risk
underwriting consumers
‘One size fits all’ product Tailored exclusive products Access to untapped High coverage, better and
consumers cheaper products
Human-intensive operations Tech enablement and Operating cost efficiencies Faster service (claims
process innovation period optimisation from 3
days to 3 hours)
Source: Company data

Chart 21: Proprietary technology enables seamless journey for consumers

Source: Company data

Proprietary technology stack helps PolicyBazaar design user-friendly consumer

journeys across all of its processes by automating various aspects across the product
value chain.

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PB Fintech, April 18, 2022 ICICI Securities
Unique self-reinforcing flywheels and strong network effects
PolicyBazaar and PaisaBazaar platforms have large, efficient and intelligent networks,
providing consumers with the ability to browse financial service products offered by 51
insurer partners and 54 lending partners.

The data available through such a network provides rich underwriting insights, which
can be used by the insurers.

Chart 22: PBF has strong reinforcing flywheels

Source: Company data

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 PB Fintech, April 18, 2022 ICICI Securities

New initiatives to provide growth optionalities

PB Partner
PB Partner is a platform created by PB Fintech (PBF) for independent sellers of
insurance and other financial products, which enables them to sell across products and
suppliers via an app. PB Partner has been built with an initial investment of Rs400mn
within a period of six months.

Estimated premium market for individual agents in the retail-facing insurance segment
stood at Rs985bn. For motor retail premiums, we have assumed 70% of the individual
agent channel premium to be for 2Ws and 4Ws to arrive at the addressable market size.
On an overall basis, Individual agents account for 40-50% of total motor premium but
since we have considered only 2W/4W segment, we are estimating a higher mix for
individual agents. Accordingly, we have assumed 17%/12%/10% CAGRs in the
premium of health / life / motor to calculate the addressable market for agents (retail
facing) by FY31E. We have assumed 10% market share for PolicyBazaar and have
derived the likely premium income to be generated by FY31E at Rs330-350bn.

Table 15: Estimating premium income growth for PB Partner

Addressable Premium for Individual
agent Rs bn FY21 FY31E
Health 191 918
Life 611 1,897
Motor 183 476
Total premium 985 3,290
POSP market share (assumed) 10%-10.5%
POSP premium 330-350
Source: IRDAI, I-Sec research

Table 16: Estimating contribution from PB Partner platform

Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E

Premium 7,450 25,000 40,000 60,000 84,000 1,17,600 1,64,640 2,14,032 2,78,242 3,47,802
Growth 236% 60% 50% 40% 40% 40% 30% 30% 25%
Rate (%) 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0 12.0

Total Revenue from policy 894 3,000 4,800 7,200 10,080 14,112 19,757 25,684 33,389 41,736
Contribution -1,043 -3,750 -4,000 360 605 847 1,383 2,055 3,339 4,591
Margin -116.7% -125.0% -83.3% 5.0% 6.0% 6.0% 7.0% 8.0% 10.0% 11.0%
Source: I-Sec research

PB Corporate
PB Corporate is PBF’s corporate / SME platform with products covering both online and
offline health and commercial lines. It is an unassisted online platform for all products in
asset and liability categories and employee benefits. PB Corporate offers complete
digital solutions to corporates from purchase to claim registrations. As at 9MFY22, PB
Corporate collected premiums of Rs2.76bn and insured ~1.1mn employees. PB
corporate has 92% retention on large clients and some of its major clients include
Delhivery, Axis Bank, CARS24, CARE health insurance, BYJU’s, Lenskart, Yatra,
Swiggy, NAVI, Niva health insurance, 1mg, colliers, Delhi Duty Free etc.

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PB Fintech, April 18, 2022 ICICI Securities
We have assumed group premium income to increase from Rs3.7trn in FY22E to
Rs12.4trn by FY31E. We have assumed PolicyBazaar to have 5% market share in this
category, which will translate to total premium income of ~Rs0.64trn. We expect this
segment to report contribution of Rs5bn by FY31E.

Table 17: Estimating premium growth for PB Corporate platform

Rs trn FY22E FY31E
GDP 240 666
Life Premium 6.8 23
Of which Group Premium (A) 3.38 11.43
Group health (B) 0.3 1
Total Group Premiums (A+B) 3.68 12.40
PB Corporate Market share 5%
PB Corporate Group premium 0.62
Source: IRDAI, I-Sec research

Table 18: Estimating contribution from PB Corporate platform

Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E
Premium 2870 8,610 25,830 64,575 1,29,150 1,93,725 2,71,215 3,79,701 4,93,611 6,41,695
Growth 200% 200% 150% 100% 50% 40% 40% 30% 30%
Take rate 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%
Revenue 230 689 2,066 5,166 10,332 15,498 21,697 30,376 39,489 51,336
Contribution -200 -800 -938 -852 76 775 1,736 2,430 3,554 5,134
Margin -87% -116% -45% -16% 1% 5% 8% 8% 9% 10%
Source: I-Sec research

Visit Health
Visit Health is an associate of PBF and offers health & wellness services for corporates
(online/offline doctor consultations, annual health checkup, discounts on labs and
pharmacies). It also offers digital OPD membership plans for consumer and digital
health services for health / life insurers. Visit Health had turnover of Rs12mn/Rs25mn/
Rs89mn in FY19/FY20/FY21. In 9MFY22, its total revenues grew 100% and PBT
margins stood at 7.5%.

MyLoanCare Ventures
Another associate of PBF, MyLoanCare Ventures (MLCV), received an NBFC license
from RBI in Sep’21 [link]. PBF acquired 24.93% stake in it in Dec’21. MLCV is a 100%
digitally-powered lending platform that operates under the name MONEYWIDE using
analytics-based tech stack. According to MLCV, 3mn customers use its platform every
month and loans worth Rs50bn have been disbursed through it (until Dec’21). Company
has 30 lending partners.

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 PB Fintech, April 18, 2022 ICICI Securities

Experienced management can be a big differentiator

Founders of PB Fintech (PBF) understand the consumers’ pain points and structural
problems in the insurance and financial services industry. They have almost two
decades of experience, which has given them insights into consumer needs and
technology. Entrepreneurial culture and focus on execution have helped attract and
retain talent. At the key executive level, there was no attrition between FY19-Q1FY21.
In FY21, only two key executives out of 25 resigned.

Management details
 Mr. Yashish Dahiya is chairman, executive director and CEO of the company.
He holds a bachelor’s degree in technology from Indian Institute of Technology,
Delhi, a postgraduate diploma in management from Indian Institute of Management,
Ahmedabad, and a master’s degree in business administration from Institute
Européen d'Administration des Affaires (INSEAD), France. He was previously
associated with ITW Signode India Limited, Bain & Company Inc. (London),
eBookers PLC (UK) and CI2I Investments Limited.
 Mr. Alok Bansal is a wholetime director and CFO of the company. He holds a
bachelor’s degree in technology from Shri Shahu Ji Maharaj University, Kanpur, and
a postgraduate diploma in management from Indian Institute of Management,
Calcutta. He was previously associated with Voltas Limited, General Electric
International Operations Co. Inc. (India), iGate Global Solutions Limited, Mahindra
and Mahindra Limited, and FE Global Technology Services Private Limited
 Mr. Sarbvir Singh is the president of PolicyBazaar and non-executive director
of the company. He holds an integrated master’s degree in mathematics and
computer applications from Indian Institute of Technology, Delhi, and a
postgraduate diploma in management from Indian Institute of Management,
Ahmedabad. He has previously served as managing partner of WaterBridge Capital
Management LLP and as managing director of Capital18, a part of the Network18
group.
 Mr. Naveen Kukreja is the co-founder and CEO of PaisaBazaar. He was associated
with the company PBF since 3rd Feb’14 till 31st Mar’16, and thereafter has been
associated with PaisaBazaar since 1st Apr’16. He holds a bachelor’s degree in
engineering from University of Delhi and a postgraduate diploma in management
from Indian Institute of Management, Kolkata. He was previously associated with
Citibank N.A. (India), Capital One (Europe) Plc and Aviva Life Insurance Company
India Limited.
 Mr. Sharat Dhall is the chief operating officer of PolicyBazaar. He has been
associated with the platform since 18th Nov’19. He holds a master of management
studies degree from Birla Institute of Technology and Science, Pilani, and a
postgraduate diploma in business management from XLRI, Jamshedpur. He was
previously associated with Hindustan Lever Limited, Times Internet Limited, and
Yatra Online Private Limited. He currently also serves as an advisory council
member of Oktober6 Insight Private Limited, India.

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PB Fintech, April 18, 2022 ICICI Securities
 Mr. Saurabh Tiwari is the chief technical officer of PolicyBazaar. He was initially
associated with the company since 23rd Sep’10 till 15th Jul’16 and later rejoined it on
1st Feb’19. He holds a bachelor’s degree of technology from Indian Institute of
Technology, Kanpur, a master’s degree in technology from National University of
Singapore and has completed an executive programme in business management
from Indian Institute of Management, Calcutta. He was previously associated with
myMBSC.com Ptd. Ltd. (Singapore), IBM India Private Limited and GEP Solutions
Private Limited.
 Mr. Manoj Sharma is the director of finance of PolicyBazaar. He was associated
with the company since 26th Aug’08 till 30th Nov’14, and thereafter has been
associated with PolicyBazaar since 1st Dec’14. He holds a bachelor’s degree in
commerce from Kurukshetra University, has qualified as a chartered accountant
from the Institute of Chartered Accountants of India and as an associate with the
Insurance Institute of India. He was previously associated with Fiamm Minda
Automotive Limited, Ericsson India Private Limited and FE Global Technology
Services Private Limited.

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 PB Fintech, April 18, 2022 ICICI Securities

PaisaBazaar to also benefit from growth outlook in

digital consumer lending
Consumer lending business is one of the lowest credit
penetrated segments
India’s consumer lending market stood at Rs36.8trn (banks + NBFCs) as at H1FY22.
Despite the large market size, penetration in FY20, measured in terms of outstanding
consumer debt as % of nominal GDP, is considered relatively low at 16.7% vs 79.2% in
the US and 55.6% in China.

The low consumer lending penetration in India is largely due to inadequate financial
literacy amongst borrowers, limited reach of lending institutions in tier-3 cities and rural
India, low creditworthiness and lack of credit history of borrowers, and traditional
consumer mindset of remaining debt-free.

Chart 23: Segmental breakup of consumer lending Chart 24: Digital lending penetration in CY20
as on H1FY22
Consumer
Durables Digital lending % of total lending in Consumer
1% segment
Others 60% 55%
30% Housing
41% 50%

40%

Gold Loan 30% 26%

5% 22%
20%

Vehicle 10%
loans
17% Adv against
Credit Card FD 0%
Education
3% 2% India USA China
1%
Source: RBI. Source: Frost and Sullivan Analysis, Company RHP
Note: FY20 for India includes disbursal of personal loans, credit card
loans, home loans, education loans, auto loans and consumer durable
loans and excludes loan against property

Penetration of digital lending and marketplace players in consumer lending industry in

India is expected to improve in the future due to growth in internet adoption. In FY20,
PaisaBazaar was India’s largest digital consumer credit marketplace with a 51.4%
market share, based on disbursals. Other major players in digital consumer credit
marketplace include BankBazaar and CreditMantri.

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PB Fintech, April 18, 2022 ICICI Securities
Segment overview
PaisaBazaar is a digital lending platform that enables consumers to choose and apply
for credit products. With the help of 60 credit partners across banks, NBFCs and
fintechs, it offers a wide choice of products like personal loans, business loans, credit
cards, home loans and loans against property.

With the help of PaisaBazaar platform, the company analyses the data submitted by the
consumer based on which best offers are presented before the clients. PaisaBazaar
also offers digital KYC process to make loan and credit card application process
seamless for the customers. It also offers free credit score for all Indians, which helps
them be credit-aware.

 In FY22, disbursement of loans from PaisaBazaar platform stood at Rs66.1bn, up

126% YoY and credit card issuance increased from 45k in FY20 to 162k in FY21.
Over 27mn customers availed of the credit score product as at Mar’21 vs 22mn in
FY20.

 Similar to PolicyBazaar, PaisaBazaar also provides its partners with operational

efficiency and reduced acquisition costs. It offers access to varied consumer
segments and other high-quality data to determine underwriting risks.

 PaisaBazaar is India’s largest digital credit marketplace with 53.7% market share
based on disbursals. The portal currently receives ~1.5mn queries per month for
credit products.

 PaisaBazaar offers services to cater to all categories of consumer from super-prime

to the credit-challenged.

Chart 25: PaisaBazaar customer segmentation based on various categories and

plans offered to them.

Source: Company data

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 PB Fintech, April 18, 2022 ICICI Securities
Chart 26: PaisaBazaar disbursal trends

Paisabazaar disbursal (Rs mn)

Proportion of loan
disbursals to existing 70,000 65,496 66,070
base of credit score 60,000
consumers during 51,015
50,000
FY19 / FY20 / FY21
stood at 42% / 60% / 40,000
67%. 29,168
30,000

20,000

10,000

-
FY19 FY20 FY21 FY22
Source: Company data

Chart 27: PaisaBazaar’s partners

Source: Company website

We expect PaisaBazaar’s disbursals to grow at 20% CAGR between FY22-FY31E and

expect contribution margin to grow gradually to 40% by FY31E.
Table 19: Estimation of contribution from PaisaBazaar platform
Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E CAGR

Total disbursal 66,070 82,588 1,03,234 1,29,043 1,54,852 1,85,822 2,22,986 2,67,584 3,21,100 3,69,265 21%
110% 25% 25% 25% 20% 20% 20% 20% 20% 15%

Revenue 1,982 2,852 3,565 4,456 5,347 6,416 7,699 9,239 11,087 12,750 23%
Take rate 3.0 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5
Contribution 496 855 1,141 1,470 1,818 2,246 2,772 3,419 4,213 5,100 30%
Margin 25 30 32 33 34 35 36 37 38 40
Source: I-Sec research

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PB Fintech, April 18, 2022 ICICI Securities

We estimate Rs10.2bn EBITDA (adj) by FY26E driven

by strong growth outlook
PB Fintech (PBF) earns its maximum revenues from existing businesses, viz.
PolicyBazaar and PaisaBazaar. Contribution from new business initiatives is low, but
they are likely to contribute heavily going forward.

Chart 28: Estimated revenue break up (FY22E) Chart 29: Estimated revenue break up (FY26E)

New
FY22E FY26E
Initiatives
11%

Paisa
New
Bazaar
Initiatives,
15%
40%
PB
(Standalone
), 50%

PB
(Standalone Paisa
) Bazaar,
74% 10%
Source: I-Sec Research

Table 20: Summary of contribution margin trend (segment-wise)

Rs mn FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E
PolicyBazaar
Premium 58,190 86,766 1,20,445 1,64,143 2,20,980 2,90,500 3,73,946 4,72,971 5,91,043 7,33,995
Revenue 9,388 11,965 15,540 20,192 27,343 34,774 43,583 53,903 66,203 81,120
Contribution 3,516 4,786 6,216 8,003 13,156 16,962 21,509 26,890 33,272 44,036
Margin (%) 37.5 40.0 40.0 40 48 49 49 50 50 54
PaisaBazaar
Disbursal 66,070 82,588 1,03,234 1,29,043 1,54,852 1,85,822 2,22,986 2,67,584 3,21,100 3,69,265
Revenue 1,982 2,852 3,565 4,456 5,347 6,416 7,699 9,239 11,087 12,750
Contribution 496 855 1,141 1,470 1,818 2,246 2,772 3,419 4,213 5,100
Margin (%) 25 30 32 33 34 35 36 37 38 40
Other entities (PB
Corp)
Premium 2,870 8,610 25,830 64,575 1,29,150 1,93,725 2,71,215 3,79,701 4,93,611 6,41,695
Revenue 230 689 2,066 5,166 10,332 15,498 21,697 30,376 39,489 51,336
Contribution -200 -800 -938 -852 76 775 1,736 2,430 3,554 5,134
Margin (%) -87 -116 -45 -16 1 5 8 8 9 10
Offline (POSP)
Premium 7,450 25,000 40,000 60,000 84,000 1,17,600 1,64,640 2,14,032 2,78,242 3,47,802
Revenue 894 3,000 4,800 7,200 10,080 14,112 19,757 25,684 33,389 41,736
Contribution -1,200 -3,750 -4,000 360 605 847 1,383 2,055 3,339 4,591
Margin (%) -134 -125 -83 5 6 6 7 8 10 11
Dubai
Premium 1240 2232 3571 5357 8035 10446 13579 17653 22067 27583
Revenue 248 446 714 1,071 1,607 2,089 2,716 3,531 4,413 5,517
Contribution -300 -250 -230 -210 -180 -129 -38 678 1,289 2,162
Margin (%) -121 -56 -32 -20 -11 -6 -1 19 29 39
Consol
Premium 69,750 1,22,608 1,89,846 2,94,075 4,42,166 6,12,270 8,23,381 10,84,358 13,84,963 17,51,075
Disbursal 66,070 82,588 1,03,234 1,29,043 1,54,852 1,85,822 2,22,986 2,67,584 3,21,100 3,69,265
Revenue 12,742 18,952 26,685 38,086 54,709 72,889 95,452 1,22,733 1,54,582 1,92,459
Contribution 2,312 841 2,189 8,771 15,474 20,700 27,361 35,471 45,666 61,023
Margin (%) 18 4 8 23 28 28 29 29 30 32
Source: I-Sec research

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 PB Fintech, April 18, 2022 ICICI Securities

Organisation structure
PB Fintech (PBF) has built India’s largest online platform for insurance and lending
products, according to Frost & Sullivan, leveraging the power of technology, data and
innovation. Company provides convenient access to insurance, credit and other
financial products and aims to create awareness amongst Indian households about the
financial impact of death, disease and damage. Through its consumer-centric approach,
it seeks to enable online research-based purchases of insurance and lending products
and increase transparency, which enables consumers to make informed choices. PBF
also facilitates its insurer and lending partners in the financial services industry to
innovate and design customised products for consumers leveraging its extensive data
insights and analytics capabilities

 PolicyBazaar platform is an online platform for consumers and insurer

partners to, respectively, buy and sell core insurance products. PolicyBazaar offers
consumers an information-rich, user-friendly, and tech-driven self-service platform
for: i) pre-purchase research; ii) purchase, including application, inspection, medical
check-up and payment; and iii) post-purchase policy management, including claims
facilitation, renewals, cancellations and refunds.
 PaisaBazaar is an independent digital lending platform that enables consumers
to compare, choose and apply for personal credit products. Its business model is
based on resolving fundamental consumer concerns when accessing personal
credit products. The algorithm-based technology platform provides consumers with
access to multiple personal credit offers across all segments, data-driven product
recommendations, comparison tools, unbiased advice on the most suitable offers
and digital KYC processes that make loan and credit card applications seamless
and convenient.
 Docprime is principally in the business inter alia: 1) supplying, marketing,
promoting, selling, reselling, developing, facilitating and consulting services, and 2)
acting as an agent, facilitator, collaborator, distributor, representative in all types and
grades of healthcare, personal care, lifestyle, beauty, wellness, pharmaceutical and
related products.
 Icall Support Services Private Limited: The principal business of Icall is to inter
alia offer online and offline direct marketing in India and abroad.
 Accurex Marketing and Consulting Private Limited: Accurex is principally in the
business of inter alia facilitating the platform for online and offline marketing solution
services.
 PB Marketing and Consulting Private Limited is in the business of online, offline
and direct marketing in India and abroad.
 PB Fintech FZ – LLC is engaged in the business of online marketing and consulting
of insurance and non-insurance leads in the United Arab Emirates. Its operations
were started in FY19.

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PB Fintech, April 18, 2022 ICICI Securities

Valuation
We have assumed terminal growth at 7% and cost of equity at 12% to arrive at the target
price of Rs940.

Table 21: DCF model

(Rs mn) FY21 FY22E FY23E FY24E FY25E FY26E FY27E FY28E FY29E FY30E FY31E
PAT (1,502) (9,693) (7,558) (4,508) 3,075 11,221 17,351 18,120 24,216 31,749 43,194
Add: ESOP cost 983 6,100 5,500 3,150 2,000 1,000 300 - - - -
Add: Depreciation 414 415 400 400 400 400 400 400 400 400 400
Less: capex (168) (600) (600) (600) (600) (600) (600) (600) (600) (600) (600)
Less: WC 919 -336 -509 -635 -937 -1,366 -1,495 -809 -2,281 -1,087 -3,020

FCFE (857) (2,242) (548) 277 7,011 14,587 20,146 19,929 27,496 33,837 47,214
FCFE/PAT
Terminal FCF 10,10,377
Factor 1 2 3 4 5 6 7 8 9
Total FCF (2,242) (490) 221 4,990 9,270 11,431 10,097 12,438 13,666 3,81,378

NPV (Rs mn) 4,43,002

NOSH 472.4
Value per share (Rs) 940
Source: I-Sec research

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 PB Fintech, April 18, 2022 ICICI Securities

Key risks
 PB Fintech (PBF) operates in the dynamic and competitive online fintech industry,
which makes it difficult to predict its prospects.
 High cash burn in promoting new businesses or to maintain brand strength among
competition is a risk to free cash flows.
 If PBF’s insurer and lending partners fail to offer products catering to the evolving
needs of consumers, it may not be able to retain its existing, or attract new
consumers to its online platforms.
 Company depends on cooperation with its insurer and lending partners. Its business
may be negatively affected if the partners do not continue their relationship with it or
if their operations fail.
 Proper functioning of PBF’s online platforms and technology infrastructure is
essential to its business. Any disruption to its IT systems and infrastructure could
materially affect its ability to maintain satisfactory performance of its platforms and
deliver consistent services to users.
 PBF generates and processes a large amount of data, and any failure to protect
confidential information, prevent cybersecurity and data breaches or improper use
or disclosure of such data will materially and adversely affect its business,
reputation, financial condition and results of operations.
 Company derives its revenues from sale of financial services products primarily on
commissions and other fees agreed with its insurer and lending partners, and any
decrease in these fee rates may adversely affect operations.
 A credit crisis or prolonged downturn in the credit markets may materially and
adversely affect the reputation, business, results of operations and financial position
of PaisaBazaar.

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PB Fintech, April 18, 2022 ICICI Securities

Financial summary
Table 22: Profit and Loss account
(Rs mn)
FY20 FY21 FY22E FY23E FY24E FY25E FY26E
Total Revenue 7,713 8,867 12,742 18,952 26,685 38,086 54,709

Operating costs 3,480 3,091 4,931 6,755 7,623 8,960 10,783

Acquisition Costs 3,181 2,246 5,499 11,355 16,873 20,355 28,452
Contribution 1,052 3,530 2,312 841 2,189 8,771 15,474
Margin (%) 14 40 18 4 8 23 28

Brand expenses 1,271 1,433 2,043 1,780 1,930 2,037 2,117

Other expenses 2,813 2,712 3,227 3,058 3,038 3,070 3,112
Adjusted EBITDA -3,032 -615 -2,958 -3,996 -2,778 3,663 10,245
Margin (%) -39% -7% -23% -21% -10% 10% 19%
ESOP Cost 167 983 6,100 5,500 3,150 2,000 1,000
EBITDA -3,199 -1,598 -9,058 -9,496 -5,928 1,663 9,245
Other Income 843 708 1,100 3,527 2,500 2,600 2,800
Depreciation 473 414 415 400 400 400 400
Finance cost 119 115 100 90 81 73 66

PBT -2,948 -1,419 -8,473 -6,460 -3,909 3,790 11,579

Tax 92 83 - - -
PAT -3,040 -1,502 -8,473 -6,460 -3,909 3,790 11,579
Adjusted PAT -2,873 -520 -2,373 -960 -759 5,790 12,579
Source: I-Sec Research

Table 23: Balance sheet

(Rs mn)
FY20 FY21 FY22E FY23E FY24E FY25E FY26E
Property, plant and equipment 403 235 420 620 820 1,020 1,220
Right-of-use assets 1,013 977 977 977 977 977 977
Intangible assets 57 36 36 36 36 36 36
Investments - 1 1 1 1 1 1
Current Tax Assets (Net) 1,117 550 577 606 636 668 701
Others Assets 60 115 120 126 133 139 146
Total Non-Current assets 2,651 1,912 2,130 2,365 2,602 2,840 3,081
Trade receivables 1,788 1,729 2,618 3,894 5,483 7,304 10,492
Investments 20 1,377 1,377 1,377 1,377 1,377 1,377
Cash and cash equivalents 8,534 4,388 38,993 37,333 35,748 40,411 51,433
Bank balances others 2,522 13,714 13,714 13,714 13,714 13,714 13,714
Other current assets 245 187 187 187 187 187 187
Total current assets 13,109 21,395 56,890 56,506 56,509 62,993 77,203
Total assets 15,760 23,307 59,020 58,871 59,111 65,833 80,284

Equity Share capital 0 0 899 908 918 927 936

Instruments entirely equity in nature 11 12 12 12 12 12 12
Reserves and surplus 12,647 19,905 54,133 53,173 52,413 58,204 70,783
Total equity 12,658 19,917 55,044 54,093 53,343 59,142 71,731
Lease liabilities 935 958 958 958 958 958 958
Employee benefit obligations 136 222 222 222 222 222 222
Total non-current liabilities 1,071 1,180 1,180 1,180 1,180 1,180 1,180
Lease liabilities 150 129 129 129 129 129 129
Trade payables 1,179 1,019 1,571 2,337 3,290 4,174 5,996
Other financial liabilities 365 445 467 490 515 540 567
Employee benefit obligations 136 163 167 170 173 177 180
Other current liabilities 200 454 463 472 482 491 501
Total current liabilities 2,030 2,210 2,796 3,597 4,588 5,511 7,373
Total equity and liabilities 15,760 23,307 59,020 58,871 59,111 65,833 80,284
Source: I-Sec Research

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 PB Fintech, April 18, 2022 ICICI Securities
Table 24: Cashflow
(Rs mn)
FY20 FY21 FY22E FY23E FY24E FY25E FY26E
PBT -2,948 -1,419 -8,473 -6,460 -3,909 3,790 11,579
Depn 473 414 415 400 400 400 400
Other Income -843 -708 -1,100 -3,527 -2,500 -2,600 -2,800
Finance cost 119 115 100 90 81 73 66
Others -10 1,049 6,100 5,500 3,150 2,000 1,000
Op cashflow before WC changes -3,209 -548 -2,958 -3,996 -2,778 3,663 10,245
Changes in CA -811 630 -922 -1,311 -1,626 -1,859 -3,228
Changes in CL 490 288 586 802 991 923 1,862
Taxes paid -92 -83 - - - - -
Cashflow from operations -3,622 287 -3,294 -4,506 -3,413 2,726 8,879

Cashflow from investing activities

Capex 84 -168 -600 -600 -600 -600 -600
-
Change in investments 315 12,550 - - - - -
Other income 843 708 1,100 3,527 2,500 2,600 2,800
Cashflow from investing activities 1,241 -12,011 500 2,927 1,900 2,000

Cashflow from Financing activities

Proceeds from issue of shares 10,594 7,809 37,500 9 9 9 9
Principal elements of lease payments -176 -106 - - - - -
Interest elements of lease payments -105 -115 -100 -90 -81 -73 -66
Dividend - - - - -
Cashflow from Financing activities 10,313 7,588 37,400 -81 -72 -64 -56

Change in cash 7,932 -4,135 34,606 -1,660 -1,585 4,663 11,022

Opening 601 8,523 4,388 38,993 37,333 35,748 40,411
Closing 8,534 4,387 38,993 37,333 35,748 40,411 51,433
Source: I-Sec research

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PB Fintech, April 18, 2022 ICICI Securities

Index of Tables and Charts

Tables
Table 1: Motor segment penetration also remains low largely led by 2-wheeler segment ... 4
Table 2: Online premium mix as % of total premium; India has a long growth road ahead . 5
Table 3: Online channels (Retail - Life and Health) and PB Fintech (PBF) have outgrown
the industry ...................................................................................................................... 5
Table 4: Core PolicyBazaar has only 6% market share in the overall retail premium market
(ex-savings). If it expands up to 25% in next decade, PB can clock 40% CAGR. .......... 6
Table 5: Core PB premiums can witness 53% CAGR between FY21-31 if industry online
premium penetration increases from 1% to 20% while Core PB market share declines
from 64% to 50% ............................................................................................................. 6
Table 6: Market share of PolicyBazaar in terms of number of policies issued ..................... 6
Table 7: PolicyBazaar revenues have grown at a rapid pace… ........................................... 6
Table 8: PolicyBazaar is the most downloaded app amongst peers .................................... 7
Table 9: Non-life insurance commission market has witnessed 12% CAGR between FY19-
FY21 ................................................................................................................................ 8
Table 10: Life insurance commission market has witnessed 9% CAGR between FY19-
FY21 ................................................................................................................................ 9
Table 11: Driven by increasing penetration levels and rising digitalisation, we expect PBF
to clock >40% CAGR in its total premiums ................................................................... 10
Table 12: We estimate contribution to clock 32% CAGR over the next decade ................ 10
Table 13: Insurer-wise revenue contribution in PolicyBazaar (FY20)................................. 14
Table 14: How PolicyBazaar is helping mitigate the problems faced by stakeholders in
India insurance sector ................................................................................................... 16
Table 15: Estimating premium income growth for PB Partner ............................................ 18
Table 16: Estimating contribution from PB Partner platform .............................................. 18
Table 17: Estimating premium growth for PB Corporate platform ...................................... 19
Table 18: Estimating contribution from PB Corporate platform .......................................... 19
Table 19: Estimation of contribution from PaisaBazaar platform........................................ 24
Table 20: Summary of contribution margin trend (segment-wise) ...................................... 25
Table 21: DCF model .......................................................................................................... 27
Table 22: Profit and Loss account ...................................................................................... 29
Table 23: Balance sheet ..................................................................................................... 29
Table 24: Cashflow ............................................................................................................. 30

Charts
Chart 1: Based on life insurance premium as % of GDP, India is largely in line with global
average ........................................................................................................................... 3
Chart 2: But in terms of premium density (premium per capita), 4x growth is possible if we
compare the penetration level with China ....................................................................... 3
Chart 3: India has one of the highest mortality gaps (Protection required less Sum
insured)… ........................................................................................................................ 3
Chart 4: …suggesting significant headroom for protection opportunity over the next decade
........................................................................................................................................ 3
Chart 5: Health insurance penetration in 2019 (gross direct premium as % of nominal
GDP) ............................................................................................................................... 4
Chart 6: Health insurance density is also low, thus indicating scope for growth .................. 4
Chart 7: Out-of-pocket expenditure as % of current healthcare expenditure is high
compared to global markets ............................................................................................ 4
Chart 8: … led by healthy premium growth .......................................................................... 7
Chart 9: … and growth in agent productivity......................................................................... 7
Chart 10: Growth in PB’s sum assured has been strong in past three years ....................... 7
Chart 11: FY21 Commission market share (life and non-life) ............................................... 8
Chart 12: We expect PBF’s renewal book to grow at 38% CAGR… .................................. 11

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 PB Fintech, April 18, 2022 ICICI Securities
Chart 13: … and revenues to grow at 30% CAGR ............................................................. 11
Chart 14: Contribution mix of NBP and renewal revenues ................................................. 11
Chart 15: Cost-to-income ratio (consolidated levels) .......................................................... 11
Chart 16: PBF consumer cohort of total premium from health insurance .......................... 12
Chart 17: PBF consumer cohort of total premium from Motor insurance ........................... 12
Chart 18: Estimated mix of total premium (FY21): PBF is a play on both life and non-life
insurance ....................................................................................................................... 13
Chart 19: Revenue mix of insurers is also widely spread ................................................... 13
Chart 20: Salient features of the PolicyBazaar platform ..................................................... 15
Chart 21: Proprietary technology enables seamless journey for consumers ..................... 16
Chart 22: PBF has strong reinforcing flywheels .................................................................. 17
Chart 23: Segmental breakup of consumer lending as on H1FY22 ................................... 22
Chart 24: Digital lending penetration in CY20 ..................................................................... 22
Chart 25: PaisaBazaar customer segmentation based on various categories and plans
offered to them. ............................................................................................................. 23
Chart 26: PaisaBazaar disbursal trends ............................................................................. 24
Chart 27: PaisaBazaar’s partners ....................................................................................... 24
Chart 28: Estimated revenue break up (FY22E) ................................................................. 25
Chart 29: Estimated revenue break up (FY26E) ................................................................. 25

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 PB Fintech, April 18, 2022 ICICI Securities
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