Stock of this fintech company has tanked 70 per cent from its record high

Shares of PB Fintech, the parent company of Policybazaar, declined nearly 2 per cent to hit a new low of Rs 434 per share in Monday’s intra-day trade, in an otherwise firm market.

The stock of fintech company quoted lower for the seventh straight trading day, as shares fell 12 per cent, during the period. PB Fintech’s pre-IPO shareholders’ lock-in expired on November 15, 2022.

PB Fitech traded at its lowest level since market listing on November 15, 2021. The stock price of the company more-than-halved or were down 55 per cent against its issue price of Rs 980 per share. It tanked 70 per cent from its record high level of Rs 1,470, which it had touched on November 17, 2021.

The Group is primarily engaged in providing online marketing, consulting and support services through its online portal policybazaar.com and paisabazaar.com, largely for the financial service industry, including insurance.

At 01:38 PM: PB Fintech traded 1 per cent lower at Rs 436 per share, on the back of heavy volumes. In comparison, the S&P BSE Sensex was up 0.80 per cent at 58,384 points. The average trading volumes on the counter jumped over 10-fold, as 551,000 shares changed hands on the BSE, against an average sub 50,000 shares that were traded in the past two weeks.

With 28 million shares opening up on November 15, 2022, along with 4 million shares that were already unlocked for AIF / FVCI investors, the float for PB Fintech is expected to go up significantly, believe analysts.

"With such significant supply opening up, even a small segment of investors deciding to sell in open markets can cause abrupt movement in share price. Just for a high-level comparison, Zomato shares declined by 20 per cent plus when Uber and Tiger Global sold stakes until the company reported picture-perfect results that brought back the buyers to absorb the sales," analysts at JM Financial said.

While Info Edge has communicated that they might want to “hold as long as the business has legs to multiply money”, each pre-IPO investor might have their own rationale for holding on or liquidating the stake. With almost around 62 per cent of PB Fintech’s share capital becoming eligible to trade, analysts believe that the size is certainly large enough to have an impact.

Analysts also anticipate that the current trading valuation could be attractive for the pre-IPO investors to continue holding but they could still liquidate for different reasons. However, the brokerage firm maintained a ‘BUY’ rating on the stock with September 2023 target price of Rs 910 per share. They believe that any dip due to an open market sale by any of the pre-IPO investors should be viewed as opportunity to accumulate.

Meanwhile, in April-June quarter (Q1FY23), PB Fintech’s consolidated loss widened to Rs 204 crore from Rs 111 crore, due to higher employee and advertising and promotion expenses. However, revenue from operations, more-than-doubled to Rs 505 crore from Rs 238 crore. The company’s core business (Insurance and Paisabazzar) operating revenue, too, grew 59 per cent year-on-year (YoY) at Rs 371 crore.

"The PB management indicated core adjusted EBITDA will grow by Rs 150 crore every year over the next 3-4 years. Considering margins should ideally improve with time as renewal mix increases, this would imply lower than expected revenue growth," said analysts at ICICI Direct.