The share price of India's largest digital insurance marketplace—with a 93.4% market share—PB Fintech (Policybazaar) fell 10% from its highest price since its debut on the bourses. The stock was listed at a 17.35% premium on the BSE on Monday, and it even hit an intraday high of ₹1,249. Yet, the shares of the leading online platform for insurance disappointed its investors as the price slipped 8% on Thursday. According to Vikas Vardhan, associate manager, equity research, value research, IPOs with large issue sizes tend to get a cold response on or soon after the listing day.
PB Fintech, with an issue size of ₹5,952 crore, was the 10th largest IPO in the last five years.
Some might argue that the subdued listing of another fintech giant, Paytm on Thursday, dragged down the share price of the largest digital insurance platform. Vardhan, however, says Paytm need not be blamed. It is not a typical case for Paytm, and that it has been a trend for many other companies in the last five years. He explains with figures.
"The top ten IPOs in the last five years by issue size had a median listing gain of -1.6%, with the only major exception being Zomato, which had a good listing gain of 51%. Similarly, the bottom ten IPOs had median listing gains of 18.4%," says Vardhan. As more investors have already participated in the IPOs with large issue sizes, the FOMO (fear of missing out) is less in bigger ones post listing. However, in the smaller-sized IPOs, the prices can move by a larger magnitude, with relatively lower liquidity, he adds.
One97 Communications, or Paytm, got its shares listed in the exchanges at a discount of 9% from its share price, thereby breaking the trend of startup listing gains.
Some other equity analysts see this drop as some profit booking. Policy Bazaar, says Likhita Chepa, senior research analyst, CapitalVia Global Research, has witnessed strong listing gains and has been rallying for the last three trading sessions. It looks like there is some profit booking happening today at higher levels—due to increasing volatility in the secondary markets—which has led the stock to trade on a negative note today.
BSE 100 index moved in the range of 18,040.65 and 18,322.89 on Thursday.
Should investors sell or hold Policybazaar shares?
Policybazaar is the dominant market leader in a large and growing insurance industry—with strong tailwinds such as increasing digital penetration, rising disposable income and insurance awareness. As compared with its global peers, India has a highly underpenetrated insurance market. India was among the lowest in the world in terms of sum assured as a percentage of GDP at around 25% in FY21. In total, 72.3% of the population in India are uninsured, compared to 10.9% in the U.S. and 35% in China. The dismal adoption of insurance in our country seems a great opportunity for the company going ahead.
It could be a major player in enhancing insurance penetration in India. As per Likhita Chepa, investors can hold this stock for three to five years.