SoftBank-backed Policybazaar aims for 2021 IPO at $3.5bn valuation

Policybazaar, a SoftBank-backed Indian insurance marketplace, has revealed its plans to go public in 2021 at a valuation north of $3.5 billion, Bloomberg reports.

SoftBank’s Vision Fund bought an additional stake worth $130 million in the PolicyBazaar’s owner – ETech Aces Marketing and Consulting – earlier this month, according to Times of India. SoftBank owns more than a 15% stake in the company.

Policybazaar’s co-founder and CEO Yashish Dahiya

Just a few days later, Policybazaar’s co-founder and CEO Yashish Dahiya said its huge expansion pushed by investors including SoftBank was a “mistake” that led the company to run at a loss.

Despite this, Policybazaar expects to return to profitability by the end of this year. To do this, it is cutting down on marketing and focusing on core products, such as health and motor insurance.

IPO at a mega valuation

Policybazaar could potentially become the first of India’s mega start-ups to debut with an initial public offering (IPO). Other mega start-ups in India also hedging for IPOs between 2021-22 include Ola, Flipkart and Paytm.

Prior to a September 2021 IPO, Policybazaar plans to secure around $250 million in a round of financing at a $2 billion-plus valuation.

Dahiya tells Bloomberg that Policybazaar is now selecting two to three IPO lead underwriters from a roster including several Wall Street banks.

“The IPO size will be about $500 million,” says Dahiya. “We have global interest and will raise in the coming weeks for the pre-IPO financing.”

Tiger Global Management and Tencent are also among the start-up’s largest backers.

Fellow SoftBank-backed insurer, Lemonade, landed $319 million at an implied market capitalisation of $1.6 billion.

The high demand for shares saw the common stock price increase and eventually fall outside of the insurer’s upper estimate.

IPO rules in India could be changing

SoftBank and Singapore-based investment firm Temasek each hold about a 15% stake in Policybazaar

Policybazaar intends to list in Mumbai, but dependent on rule changes, it could become a dual listing.

Currently, start-ups register in the US or Singapore to avoid India’s public listing rules, which don’t allow international financial services firms to list.

Japanese conglomerate SoftBank and Singapore-based investment firm Temasek each hold about a 15% stake in Policybazaar, while Tiger Global and Tencent hold roughly 8-10% stakes respectively.

Tapping India’s middle classes

Dahiya tells Bloomberg that India’s middle classes almost never have health or life insurance.

He says less than 25% of the 45 million Indians currently subscribed to an individual health plan are adequately covered for chronic diseases like diabetes and high blood pressure.

In recent years, India’s government has helped to insure half a billion of India’s underprivileged. “But the middle India has no support at all,” says Dahiya.

Founded in 2008, the online platform gives users access to life and general insurance. It also features products from major Indian insurance companies, acting a lot like a marketplace.

Sister company Paisabazaar, which launched in February 2014, facilitates loans, credit cards and sells mutual funds.

But Paisabazaar has struggled during coronavirus. The firm had to lay off around half of its workforce – 1,500 employees — last month.

“PolicyBazaar will make up more than the business downside at Paisabazaar, which is a temporary blip, and economy cannot run without loans,” a source told Times of India despite this underperformance.

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