scorecardresearchWill PB Fintech continue to bleed after falling 65% from its all-time high?

Will PB Fintech continue to bleed after falling 65% from its all-time high?

Updated: 23 Sep 2022, 09:41 AM IST
TL;DR.
Since the beginning of 2022, PB Fintech has dropped by 47%. It has a market cap of 22,812.12 crore. The stock has been under pressure for several months, owing to factors such as regulatory changes in the insurance industry, a data breach at the startup.
On June 07, the stock tumbled almost 12 percent after the company's co-founder and CEO Yashish Dahiya sold nearly 38 lakh shares of the company. 

On June 07, the stock tumbled almost 12 percent after the company's co-founder and CEO Yashish Dahiya sold nearly 38 lakh shares of the company. 

The Indian new-age tech stock PB Fintech, the parent company of Policy Bazaar and Paisa Bazaar, has been sliding since its listing. The insurance and financial aggregator made a decent debut on the exchanges. The scrip was listed at a premium of 17.35 percent at 1,150 on the NSE as against the issue price of 980. The stock rose further, and within two days of its listing, it reached an all-time high of 1,470.95. However, Since then, the stock has nearly reached new lows every month, dropping 65.57 percent from its all-time highs.

On December 17, just one month after being listed, the stock for the first time traded below its issue price. However, the stock erased those losses and rallied 20% between December and January, but thereafter, the stock never traded above its issue price of 980.

PB Fintech was listed on the exchanges on November 15, 2021. The IPO comprised a fresh issue of 3,750 crore worth of equity shares and an offer for sale of 2,267.50 crore by existing shareholders.

Since the beginning of 2022, the stock has dropped by 47%. It has a market cap of 22,812.12 crore. PB Fintech is not only the new age stock that has wiped out Investor's wealth since the beginning of the year. There are other stocks, including Zomato, Paytm, Nykaa, and Cartrade tech, which are currently trading below their issue prices.

The stock has been under pressure for several months, owing to factors such as regulatory changes in the insurance industry, a data breach at the startup and consecutive losses. 

On June 07, the stock tumbled almost 12 percent after the company's co-founder and CEO Yashish Dahiya sold nearly 38 lakh shares of the company for 230 crore through an open market transaction, according to media reports.

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Stock price chart of PB fintech

On September 21, In a regulatory filing, PB Fintech said it invested 650 crore in Policy bazaar Insurance Brokers, and 250 crore in Paisa bazaar Marketing and Consulting.

The company's losses have been ongoing for several quarters. It posted a net loss of 110.8 crore in the June 2021 quarter, and in September 2021 the losses doubled to 204.4 crores, and it continued the same trend till Q1FY23.

Despite rise in revenue by 114% from 258.2 crore to 552.7 crore, PB Fintech reported a net loss of 204.1 crore in Q1FY23 due to excessive expenses, which increased from 356.1 crore in the same quarter of the previous year to 739.5 crore in the June quarter.  

Meanwhile, domestic brokerage firm IIFL is bullish on the stock, the brokerage firm has a 12-month target price of 650/share on PB fintech, which hints toward an upside of 38 percent from its latest close.

Policy Bazaar is well placed in the regulated but under-penetrated insurance and consumer credit markets owing to its first mover advantage, strong brand, partnerships, and technology prowess, it said.

IIFL forecasts Policy Bazaar to deliver a 37% revenue CAGR over FY22-26E driven by strong growth in underlying markets, share gains, and operating leverage. Also, it expects Policy Bazaar to increase its contribution margin to 41% (23.33% in FY22) and EBITDA margin to 15% by FY26, driven by strong operating leverage, higher employee productivity, a sharp drop in ESOP costs, and improved profitability of new initiatives, including the PoSP channel, Times now reported. 

IIFL stated some of the key risks include material changes in the regulatory guidelines, potential withdrawal of business from some of the large insurers and partners on the platforms, and heightened competitive intensity led by sharp capital inflows in the start-ups.

Another domestic brokerage firm, ICICI Securities, in its research report dated August 11, said that the company's June numbers were in the right direction of increased profitability. It expects the contribution margin in the core business to increase from 39% in FY22 to 42% in FY26E. The brokerage firm recommends a BUY with a DCF-based target price of 700, representing a 38% increase over the CMP.

Prior to this, Kotak Institutional Equities also initiated coverage on the stock with a target price of Rs700/share. The brokerage house believes that high multiyear growth will lead to consistent market share gains, thus improving unit economics and driving operating leverage over time.

PB fintech is engaged in providing integrated online marketing and IT consulting and support services largely for the financial services industry including insurance. PB Fintech operates Policy bazaar, India's largest digital insurance marketplace, and Paisa bazaar, which provides services related to lending products.

An average of 19 analysts polled by MintGenie have a 'sell' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.

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First Published: 23 Sep 2022, 09:41 AM IST