The stock of this fintech company has fallen 70 percent from a record high
Shares of PB Fintech, the parent company of Policybazaar, fell nearly 2 percent to hit a fresh low of Rs 434 per share in Monday’s intra-day trade, in an otherwise firm market.
The shares of fintech companies were lower for the seventh trading day in a row, as the shares fell 12 percent during the period. PB Fintech’s pre-IPO shareholder lock-up expired on November 15, 2022.
PB Fitech was trading at its lowest level since its IPO on November 15, 2021. The share price of the company more than halved or was down 55 percent against the issue price of Rs 980 per share. It fell 70 percent from the all-time high of Rs 1,470 it had touched on November 17, 2021.
The Group is primarily engaged in providing online marketing, advisory and support services through its web portal policybazaar.com and paisabazaar.com, mainly for the financial services industry, including insurance.
At 1:38 pm: PB Fintech traded 1 percent lower at Rs 436 per share, on the back of heavy volumes. In comparison, the S&P BSE Sensex was up 0.80 percent to 58,384 points. Average trading volume on the counter jumped more than 10 times, as 551,000 shares changed hands on the BSE, against an average of less than 50,000 shares traded in the last two weeks.
With 28 million shares opening on November 15, 2022, along with 4 million shares already unlocked for AIF/FVCI investors, the purchase price for PB Fintech is expected to go up significantly, analysts believe.
“With such a significant offer opening, even a small segment of investors deciding to sell in open markets can cause sudden moves in the share price. Just for a high-level comparison, Zomato shares fell 20 percent plus when Uber and Tiger Global sold holdings of the company reported perfect results that brought back buyers to absorb the sell-off,” analysts at JM Financial said.
While Info Edge has communicated that they may want to “hold on as long as the business has legs to multiply money,” each pre-IPO investor may have their own rationale for holding onto or liquidating their stake. With almost around 62 percent of PB Fintech’s share capital eligible to trade, analysts believe the size is certainly big enough to make an impact.
Analysts also expect that the current trading value may be attractive for the pre-IPO investors to continue to hold, but they may still liquidate for various reasons. However, the brokerage maintained a ‘BUY’ rating on the stock with a September 2023 target price of Rs 910 per share. They believe that any decline due to an open market sell-off by some of the pre-IPO investors should be seen as an opportunity to accumulate.
Meanwhile, in the April-June quarter (Q1FY23), PB Fintech’s consolidated loss widened to Rs 204 crore from Rs 111 crore, due to higher expenditure on staff and advertising and promotion. However, operating income more than doubled to Rs 505 crore from Rs 238 crore. The company’s core business (insurance and Paisabazzar) operating income also grew by 59 percent year-on-year (YoY) to Rs 371 crore.
“PB management indicated that core adjusted EBITDA will grow by Rs 150 crore every year over the next 3-4 years. Considering that margins should ideally improve over time as the renewal mix increases, this will imply lower than expected revenue growth,” said analysts at ICICI Direkte.
