Policybazaar’s value shrinks by around $400 mn in a day after its CEO sells shares

• The online insurance broker’s stock tanked by around 12% as CEO Yashish Dahiya plans to sell up to 37.69 lakh lakh equity shares.
• Dahiya holds 5.45% stake or 2.45 crore shares in the company.
• Investor sentiment took a huge hit after the company announced that the CEO itself is selling stake amid difficult market conditions.

Shares of PB Fintech, the parent company of PolicyBazaar and PaisaBazaar, took a deep dive after the company’s CEO sold his shares.

The company informed exchanges at around 10 pm on June 6 that Yashish Dahiya, chairman and CEO of PB Fintech will sell up to 37 lakh equity shares via bulk deals.

Since then, the stock went down by over 12% and its marketcap shrunk by around ₹3,000 crore or around $400 million since yesterday’ close, as per NSE data.

Before the sale, Dahiya held a 5.45% stake in the company, which he received as ESOPs.

Dahiya however would be selling his stake at a price lower than the company’s founders. In February, the co-founder of the company Alok Bansal sold 2.85 million shares for ₹236 crore at an average price of ₹825 apiece.

In 2022 so far, the stock has slid 52% and is currently 40% below its IPO price. PolicyBazaar raised ₹5,709 crore via IPO in November 2021 which included fresh issue as well as offer for sale by promoters.

Policybazaar is among the slew of tech companies that got listed in 2021 -- Zomato, Paytm and Nykaa. Unlike most of the companies that listed this year, PolicyBazaar’s investors enjoyed good listing gains of 17% on the issue price.

PB Fintech’s business model to enjoy higher growth than other insurance players
Analysts however believe the company is well placed to benefit from the rising insurance penetration in India, especially via digital distribution.

“High growth, operating leverage, strong balance sheet and established brand recall among the Indian populace are its key business moats. This should help the company generate strong free cash flows as we expect its cost-to-income ratio to plateau ahead,” said a report by ICICI Securities.

The brokerage expects the share price to grow to ₹940 per share.

In FY20, PolicyBazaar was India’s largest digital insurance marketplace with 93% market share in terms of the number of policies sold. Also, 65% of all digital insurance sales in India in FY20 happened via PolicyBazaar.

PolicyBazaar is largely into individual life insurance, retail health and motor insurance. This reflects in its overall revenues that doubled in three years between FY19 to FY21 at ₹606.9 crore.

PolicyBazaar and PaisaBazaar platforms have large networks that provide consumers with the ability to browse financial service products offered by 51 insurer partners and 54 lending partners.

In a filing to the exchange at late night of 6th June, $POLICYBZR.NSE (PB Fintech) informed the exchange that the board will be offloading 37.7lk company shares via bulk deals. The aggregate shareholding of Mr Yashish Dahiya(Chairman & CEO)as of 31.03.2022 was 1.9cr shares (4.23%) and post-exercise of 55lk ESOPs during May 2022, his aggregate shareholding increased to 2.45cr shares i.e., 5.45%. The company's co-founders and other shareholders had reduced their stake in the public issue which is rather a worrying signal with respect to the health of corporate governance. This news clearly dented the share price pulling it close to an all-time low of Rs.540, where the stock plummeted to a day's low of Rs.556(15% down from its previous closing price) The stock made a high of Rs.1,470 after it got listed at a premium from the issue price of Rs.980/equity share.

— (@vaibhavkh15) June 07, 2022

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