Tiger Global Dumps Another 2.98% Stake In Policybazaar; Fintech Startup May See Further Sell-Off In The Coming Months.

In another significant blow to fintech player Policybazaar, Tiger Global, a venture capital firm, dumped another 2.98% stake in the new-age tech startup. The VC firm off-loaded shares of PB Fintech, the parent company of Policybazaar, for an accumulative sum of INR 522.5 Cr through open market transactions on November 14.

PB Fintech operates the credit comparison website Paisabazaar and the online insurance marketplace Policybazaar.

A total of 1,34,17,607 shares, accounting for 2.98% of the firm, were sold by two funds managed by Tiger Global – Tiger Global Eight Holdings and Internet Fund III Pte.

The shares sold averaged between Rs389.38 and Rs389.44 per share, bringing the total transaction value to Rs522.50 crore.

Meanwhile, WF Asian Reconnaissance Fund purchased 50 lakh shares of the business.

Tiger Global owned 4.23% of the Policybazaar through its fund Tiger Global Eight Holdings and 2.87% through Internet Fund III Pte. 

 

Policybazaar – Going Through A Storm

The sell-off from Tiger Global follows Policybazaar reporting its quarterly financial results and the cessation of the lock-in period for pre-IPO investors.

PB Fintech shares, the operator of Policy Bazaar, have dropped 74 per cent from their all-time high in November last year. 

The Policy Bazaar stock, from its all-time high of Rs 1,470 on November 17, 2021, has witnessed its shares decline 66.43 per cent to date. The stock debuted at a premium of 17 per cent over the IPO issue price of Rs 980 on November 15, 2021. 

Policy Bazaar’s Shares Tumble

In 2022, Policy Bazaar shares have shown a considerable fall along with its market cap. India’s largest online insurer’s market cap fell to Rs 17,258 crore. The firm’s total of 0.31 lakh shares changed hands, amounting to a turnover of Rs 1.20 crore. 

The relentless selling since the listing date has resulted in a decline of over 73% from its all-time high of 1470. 

According to trading analysts on cue with the trend of a sharp correction in almost every stock listed in the last two years, Policy Bazzar’s stock price to has taken a beating even though Policy Bazaar has a robust business platform.

On cue, as of now, the stock looks weak, and a fall to Rs 340 is a possibility. 

In September, IIFL Securities gave a bullish view on PB Fintech with a 12-month target price of Rs 650. 

Policy Bazaar’s Financials – Loss

PB Fintech reported a consolidated loss of Rs 204.33 crore against Rs 110.84 crore in the first quarter of this fiscal, compared to the same period of the last fiscal due to weak operating performance. 

The company, which also operates the online lending platform Paisabazaar, reported a significant increase in employee expenses, up 82 per cent YoY and advertising & promotion expenses which are up 173 per cent YoY for the quarter. Revenue from operations stood at Rs 505.2 crore, up 112.5 per cent from Rs 238 crore last year.

Tiger Global and other VCs Cut Their India Investments

US hedge fund Tiger Global and Softbank, a Japanese investment giant, have pruned their investments in Indian startups by more than a third — from $3.8 billion in the second half of 2021 to a mere $1.08 billion in 2022.

In India, SoftBank’s investments dropped from $1.9 billion in H2 2021 by over a fifth to only $0.33 billion in H1 2022, and that of Tiger Global reduced from $1.92 to $0.74 billion in the same period.

The Sunshine Is Over – Startups

Private equity (PE) fund trackers indicate that in 2022 most of the deals that Tiger Global has invested in are in the early stage (up to series D), and only a few are in series E and above. 

Both Tiger Global and Softbank, India’s favourite Venture Capital firms that had Indian startups hit better valuations through their funding, are now going through strong headwinds on account of the global slowdown. 

Many startup founders, too, have reckoned that with the slowdown, the focus has now shifted to preserving cash, controlling costs and driving faster towards profitability, as new fund raises with large ticket sizes are becoming increasingly difficult to get.

Tiger Global, which handles about $75 billion through its PE and public funds, is going through a challenging phase this year, with losses swelling to 52 per cent in May due to the US’s sell-off in tech and growth stocks. 

Tiger Global, among others, invests in tech companies in the internet, financial and software sectors.

The fear of recession is also making investors wary of staying in startups with bloated valuations. 

In 2021, the two funds accounted for almost 20 per cent of the investments made in India. But in 2022, their investment share in India has fallen by nearly half — to 10 per cent. 

There has also been a general slowdown in the money these companies are willing to invest in Indian companies. In 2021 the top 17 funds invested $18.5 billion; however, that number has dropped to $10.08 billion in the first half of this year.

Some of the prominent startups that Tiger Global has invested in, among others in India, are – Flipkart, Zomato, Sharechat, Delhivery, Groww, Ola, Unacademy, Dream11 and Inframarket.

Tiger Global has been one of the biggest overseas investors to invest in early-stage startups in India.

Conclusion: Tiger Global, Softbank and many other VCs are wary of taking unnecessary exposure in Indian startups, and companies that they have invested in and following bloated valuations of these startups have begun to trim their risk appetite. 

As we advance, we may find the Venture Capital firms dumping more stocks of many of the startups in which both Tiger Global and Japanese investment giant SoftBank have invested.

The two Venture Capital firms have remained the darlings of the Indian startup ecosystem, investing in many startups across the board over the years, with many startups receiving funding and a boost in valuations through investments done by these Venture Capital firms.

But things may slowly change, and in the immediate future, many startups may find themselves in the same place as Policy Bazaar.