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Sec-A - Group 8 - SecureNow

Kapil Mehta started an insurance brokerage firm called SecureNow in 2011 that has grown successfully but now faces a dilemma - while Series A investors want to invest at a larger scale, a classmate offered to invest at a much lower valuation, and Mehta must decide whether to accept the lower offer or delay expansion plans to find better terms later. SecureNow's financial projections show steady growth through 2022 that could support higher valuations, but accepting a lower offer now could allow expanding operations sooner. Mehta must weigh the tradeoffs between fundraising at a lower valuation versus postponing expansion.

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Puneet Garg
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276 views7 pages

Sec-A - Group 8 - SecureNow

Kapil Mehta started an insurance brokerage firm called SecureNow in 2011 that has grown successfully but now faces a dilemma - while Series A investors want to invest at a larger scale, a classmate offered to invest at a much lower valuation, and Mehta must decide whether to accept the lower offer or delay expansion plans to find better terms later. SecureNow's financial projections show steady growth through 2022 that could support higher valuations, but accepting a lower offer now could allow expanding operations sooner. Mehta must weigh the tradeoffs between fundraising at a lower valuation versus postponing expansion.

Uploaded by

Puneet Garg
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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SECURENOW’S DILEMMA

Group 8 DISKHA MIGLANI 19P080

MAYANK ARORA 19P094

PUNEET GARG 19P101

PUNYAJA SWAROOP 19P102

RASHI JAIN 19P105

SUNKARA VAMSI KRISHNA


19P117
Indian Insurance Brokerage Sector
 Insurance penetration (measured as insurance premium as a proportion of
GDP) stood at a meager 2.71% compared to 8.97% for United States for 2001
 Insurance Broking was introduced in India in 2002 by IRDA
 In 2006, de-tariffing of insurance premiums in the General insurance business
 This opportunity attracted a large number of players in Indian insurance
brokerage industry
SETTING UP SECURENOW
 Kapil Mehta set up an insurance brokerage firm in April, 2011. He called it
SecureNow.
 Initially started with two segments-Retail and Corporate
 The firm achieved its first operational cash breakeven8 on a month to month
basis within 18 months of its operations
 They helped their clients reduce their insurance cost by almost 20%
 Estimated to have GWP of Rs. 150 million - Rs. 160 million for the fiscal
year ending March 2014
 Targeted crossing Rs. 1,000 million mark by 2018
Need for Expansion
 Mehta wanted to set up offices in 5-8 key locations
 He wanted to develop an online mobile based application, which would
require funds
 He decided to raise a small round of funding and flesh-out the
initiatives further, which estimated about Rs. 15 million
 Series A investors expressed positive interest in SecureNow. But, they
were keen to invest only at a larger scale
 Mehta’s classmate expressed an interest to invest in SecureNow at a
valuation of Rs 57 million
 This was much lower than Mehta’s expected valuation of around
Rs.500 million
The Dilemma
 Kapil Mehta recently attended meetings with Series A
investors, who wanted to invest in SecureNow, but only at a
larger scale
 The meetings with angel investors reinforced the importance
of the ‘relationship’ element while evaluating financing
option
 His classmate fulfilled the ‘relationship’ element but for
price valuation they arrived at highly varied valuations
 The dilemma was should he accept funds at a low valuation,
or should he just postpone the expansion plans
FCFF Calculation
Terminal
2014 2015 2016 2017 2018 2019 2020 2021 2022 Value
PBITDA 7.3 -6.5 -11 18.8 60.9 131.8 232.6 377.5 588.7
PBIT 6.9 -7.7 -13.5 14.5 56.5 127.2 227.4 371.9 582.4
PAT 6.8 -7.7 -13.5 11.6 42.8 84 150.1 245.4 384.4
Depreciation &
Amortization 1.2 2.5 4.3 4.4 4.6 5.2 5.7 6.4
Capex 3.5 4.7 4.1 4.7 5.1 5.7 6.4 6.7

Increase in Security
Deposit for Office
Space 0.2 0.2 0.4 0.2 0.5 0.6 0.4
Increase in Working
Capital 2.5 4.2 8.9 14.9 25.6 35.4 51.3 74.2
FCFF -12.500 -20.100 2.700 27.200 57.700 113.700 192.800 309.500 2716.66
Multiple Valuation

EV Revenue 2014 EV/Revenue


Reliance
Capital Limited 334,554 59,443 5.628148
Bajaj Finserv 343,305 116,263 2.952831

Industry EV/R 3.857916064


Revenue 22.6
EV 87.19
Liquidity discount 35%
Fair market value 56.67

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