PolicyBazaar IPO

Strengths

• Market presence: PolicyBazaar is dealing in this online space for more than a decade now. Thus, they’re well poised to expand and further strengthen their operations. According to the platform, they receive more than 100 million visitors yearly and sell about 4 lakh insurance policies a month.
• IRDAI licence: PolicyBazaar recently received its insurance broking licence from IRDAI. This licence will enable the company to venture into other business verticals like claim assistance, setting up Points of Presence networks, and various other offline services. It will also help PolicyBazaar to charge a fee for web aggregation and commission.
• Multiple products: More than 35 insurance companies are enlisted on PolicyBazaar’s platform. Thus, one can choose from a wide range of products from multiple providers.
• Strong funding: Currently, PolicyBazaar operates on a fund base of $766.6 million. Also, recently the company has received funding worth $75 million from the US-based Falcon Edge Capital. This IPO will further catalyse its growth and help it expand into various verticals.

Weaknesses 

• Losses in consecutive years: PolicyBazaar has clocked losses of Rs. 213 and Rs. 218 crores in FY19 and FY20, respectively.
• High operating costs: This company spends about 40% of its revenue on advertising and 45% on providing various employee benefits. It leaves a significant dent in its finances and restricts its scope of profit utilisation.
• Negative EBITDA margin: The EBITDA margin of PolicyBazaar was negative in FY2019 and FY2020, a worrying sign for any organisation.

Opportunities 

• Expanding UAE operations: PolicyBazaar has invested Rs. 36 crores approximately in its subsidiary in Dubai, PB Fintech FZ LLC. Currently, this venture has sold about $100 million worth of term insurance plans, and PolicyBazaar plans to up this tally to $1 billion.
• Increased awareness: Due to Covid-19, insurance penetration in the market has rapidly gone up. Hence, this aggregator is well-positioned to benefit from this rising awareness concerning insurance policies.
• Changing preferences: According to a PWC survey, nearly 50% of respondents rely on online aggregators to buy their policies. Therefore, PolicyBazaar is well poised to benefit from this.

Threats 

• Increasing competition: Over the years, various enterprises have mushroomed in the digital insurance segment, of which Bankbazaar, Acko, and Coverfox pose stiff competition to the company. Although PolicyBazaar holds the largest market share at present, the margins are thin.