PB Fintech, the operator of Policybazaar, will complete its first year of listing on bourses next month. After a robust debut on the stock exchanges during the third quarter of FY22, shares of the company have tanked over 60 per cent to Rs 455 in the morning trade on October 13, 2022 against the listing price of Rs 1,150.
The scrip listed with a premium of 17.35 per cent on November 15, 2021 over the issue price of Rs 980. However, brokerages hold a bullish view on the company despite the tepid performance during the past 11 months.
With the end of the one year lock-in period for pre-IPO investors in mid-November, the supply of tradeable shares will increase in the market.
According to JM Financial, around 28 million shares are opening up next month, along with 4 million shares that were already unlocked for AIF/foreign venture capital investors.
"The float for PB Fintech is expected to go up significantly. 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," the brokerage said.
However, it added that the current valuation could be attractive for the pre-IPO investors to continue holding but they could still liquidate for different reasons.
"We have a 'Buy' rating on the stock with a September 2023 target price of Rs 910 and believe that any dip due to an open market sale by any of the pre-IPO investors should be viewed as an accumulation opportunity. The target price indicates an upside of 100 per cent from the current market price. JM Financial further added that considering the current industry positioning and a clear path to profitability guidance provided by the management, such high discounting certainly seems brutal.
For the first quarter ended June 30, 2022, the company reported a widening of consolidated loss at Rs 204.33 crore against a loss of Rs 110.84 crore in the same period a year ago.
With a 12-month target price of Rs 650, IIFL Securities last month also gave a bullish view on PB Fintech. "We expect PB Fintech to increase its contribution margin to 41 per cent (23.3 per cent in FY22) and EBITDA margin to 15 per cent by FY26, driven by strong operating leverage, higher employee productivity, sharp drop in ESOP costs and improved profitability of new initiatives, including the point of sale person (PoSP) channel," the brokerage said.
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