Tiger Global dumps another 2.98% stake in Policybazaar; The fintech startup could see further sales 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 technology startup. The VC firm offloaded shares of PB Fintech, the parent company of Policybazaar, for a total sum of INR 522.5 Cr through open market transactions on November 14.
PB Fintech operates credit comparison website Paisabazaar and online insurance marketplace Policybazaar.
A total of 1,34,17,607 shares, representing 2.98% of the company, 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, the WF Asian Reconnaissance Fund bought 50 lakh shares in the business.
Tiger Global owned 4.23% of Policybazaar through the fund Tiger Global Eight Holdings and 2.87% through Internet Fund III Pte.
Policy Bazaar – Going Through A Storm
The sale by Tiger Global follows Policybazaar reporting its quarterly financial results and the end of the pre-IPO lock-in period for investors.
PB Fintech shares, the operator of Policy Bazaar, have fallen 74 percent 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 fall 66.43 percent year-to-date. The stock debuted at a premium of 17 percent over its IPO price of Rs 980 on November 15, 2021.
Policy Bazaar’s shares fall
In 2022, the Policy Bazaar shares have shown a significant fall along with the market value. India’s largest online insurer’s market capitalization fell to Rs 17,258 crore. A total of 0.31 lakh shares of the firm changed hands, which equates to a turnover of Rs 1.20 crore.
The relentless sell-off since the listing date has resulted in a decline of over 73% from the high of 1470.
According to trade analysts who are bucking the trend of a sharp correction in almost all stocks listed in the last two years, Policy Bazaar’s share price 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 positive view on PB Fintech with a 12-month price target of Rs 650.
The economy of the political bazaar – 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 in the previous fiscal due to weak operating performance.
The company, which also operates online lending platform Paisabazaar, reported a significant increase in employee expenses, up 82 percent year-on-year, and advertising and promotion spending, which rose 173 percent year-on-year for the quarter. Operating income was Rs 505.2 million, up 112.5 percent from Rs 238 crore last year.
Tiger Global and other VCs are cutting their India investments
American hedge fund Tiger Global and Softbank, a Japanese investment giant, have cut their investments in Indian startups by more than a third – from $3.8 billion in the second half of 2021 to just $1.08 billion in 2022.
In India, SoftBank’s investments fell from $1.9 billion in H2 2021 by over a fifth to just $0.33 billion in H1 2022, and Tiger Global’s investments reduced from $1.92 to $0.74 billion in the same period.
The Sunshine Is Over – Startups
Private equity (PE) fund trackers indicate that by 2022, most of the deals in which Tiger Global has invested are in early stage (up to Series D) and only a few are in Series E and above.
Both Tiger Global and Softbank, India’s favorite Venture Capital firms that got Indian startups to achieve better valuations through their funding, are now going through strong headwinds due to the global slowdown.
Many startup founders have also reckoned that with the downturn, the focus has now shifted to conserving cash, controlling costs and speeding towards profitability, as new big-ticket fundraising becomes increasingly difficult to come by.
Tiger Global, which manages about $75 billion through its PE and public funds, is going through a challenging phase this year, with losses widening to 52 percent in May due to a sell-off in US technology and growth stocks.
Tiger Global, among others, invests in technology companies in the Internet, finance and software sectors.
The fear of recession also makes investors wary of staying in startups with inflated valuations.
In 2021, the two funds accounted for almost 20 percent of the investments made in India. But by 2022, their investment share in India has fallen by almost half – to 10 percent.
There has also been a general decline in the money these companies are willing to invest in Indian companies. In 2021, the top 17 funds invested $18.5 billion; however, the figure has dropped to $10.08 billion in the first half of this year.
Some of the prominent startups that Tiger Global has invested in, including in India, are – Flipkart, Zomato, Sharechat, Delhivery, Groww, Ola, Unacademy, Dream11 and Inframarket.
Tiger Global has been one of the largest foreign 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 follow inflated valuations of these startups have started reducing their appetite for risk.
As we move forward, we may find Venture Capital firms dumping more shares of many of the startups that both Tiger Global and Japanese investment giant SoftBank have invested in.
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 made 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.
