SoftBank-backed Indian online insurer seeks $3.5bn valuation in Mumbai IPO

FinTech start-up Policybazaar plans to secure about $250m in pre-IPO financing

A man walks past the Bombay Stock Exchange. A custom Bloomberg index of the 30 most leveraged stocks out of India’s top 200 companies has gained 32% since the end of March. Reuters

Online insurance platform Policybazaar aims to go public in 2021 at a valuation north of $3.5 billion (Dh12.85), potentially becoming the first of India’s mega-start-ups to debut as its digital economy booms.

The start-up plans to secure about $250 million in a round of financing at a $2bn-plus valuation before a September 2021 initial public offering, co-founder Yashish Dahiya said. Policybazaar is now selecting two to three IPO lead underwriters from a roster that includes several Wall Street banks, Mr Dahiya, chief executive of Policybazaar's parent ETech Aces Marketing and Consulting, said.

“The IPO size will be about $500m,” Mr Dahiya said from London, where he is currently based. “We have global interest and will raise in the coming weeks” for the pre-IPO financing.

Policybazaar, which counts SoftBank's Vision Fund, Tiger Global Management and Tencent among its largest backers, may become the first of India’s digital-era upstarts to go public.

Like fellow unicorns Ola, Flipkart and Paytm, the FinTech company rode an upswell of internet and mobile use that spurred digital services across the world’s second-most populous nation.

It may be hoping to replicate the spectacular coming-out party of another SoftBank-backed insurer, Lemonade, which soared on its US debut last month.

Policybazaar intends to list in Mumbai but Mr Dahiya said he would consider a dual listing if rules change.

India is tweaking regulations to help companies list overseas.

Many start-ups have incorporated in countries like Singapore and the US because of friendlier public listing rules (among other considerations), but India currently prohibits that for sensitive sectors like financial services.

SoftBank and Singaporean state investment company Temasek Holdings each hold about a 15 per cent stake each in the start-up, while Tencent and Tiger Global have about 10 and 8 per cent, respectively.

Policybazaar is among a clutch of FinTech start-ups seeking to upend the stranglehold of state- and bank-backed insurers in a tightly regulated financial services segment.

Like rivals Amazon and Alibaba-backed Paytm, it is trying to tap a large population of underinsured – or non-insured – Indians.

Though the government has recently pushed health insurance plans to the less privileged, overall insurance penetration hovered at less than 4 per cent in 2017, according to the government’s India Brand Equity Foundation.

Yet, as economic uncertainties rise, a young insurable population, growing middle class and rising awareness about the need for retirement planning is buoying the market.

The industry should touch about $280bn in revenue this year and expand by 14 per cent to 15 per cent annually over the next three to five years, according to the foundation.

Policybazaar itself helps sell about a million policies a month. The aggregator allows users to compare life, health, vehicle, travel and property policies from 40 insurers on its website without going through conventional agents, who sell based on incentives.

Policybazaar’s own customer service reps help users settle claims, redeem paybacks and amend policies.

Sister unit Paisabazaar facilitates loans, credit cards and sells mutual funds, tapping an adjacent Indian digital payments market forecast by Credit Suisse to cross $1 trillion by 2022.

It is in insurance where there is a pressing need. India’s middle classes almost never have health or life insurance, said Mr Dahiya.

Less than a fourth of the 45 million Indians who currently do subscribe to an individual health plan are adequately covered for chronic diseases such as diabetes and high blood pressure.

“The rest of them have ‘a’ plan,” said Mr Dahiya. In recent years, a government-funded programme has covered half a billion of India’s underprivileged. “But the middle India has no support at all.”