Forcing companies to declare profits early will destroy shareholder value: Policybazaar founder : Tech News

PB Fintech, which runs Policybazaar and Paisabazaar,
made its debut on the bourses Monday, becoming the third high-profile consumer Internet startup after Zomato and Nykaa to list in India.

The online insurance marketplace closed the day’s trade with a market cap of Rs 54,070 crore, as the stock ended at Rs 1,202.90 on the BSE, nearly 23% higher than the issue price.

Yashish Dahiya, cofounder and chairman of PB Fintech, said he was “quite kicked” with the listing gain, which though seemed moderate compared with the 50% and 80% pops that Zomato and Nykaa, respectively, saw on their first day of trade.

“I don’t understand any of it (how share prices jump). Never in my life have I invested in a single stock or mutual fund ever,” Dahiya said on the opening day’s trade. “I have only done one thing: FDs (fixed deposits) and paid my children’s tuition (fees) with those FDs.”

Dahiya, who cofounded PB Fintech along with Alok Bansal in 2008, told ET in an interview that a short-term focus on profit could be destructive for long-term value creation for shareholders and companies like Policybazaar.

He said the company was not taking any “pressure on profitability” after the IPO.

New-age companies like PB Fintech can’t be valued based on what they are today, he told ET. “You are valuing them for what they can become in a five to 10 years’ time. Let’s not be stupid and force these companies to try and declare profits early. That will be value-destroying for shareholders in the long term … without a shadow of doubt.”

Dahiya’s comments come on the back of scepticism from some investors that the new-age startups are not profitable and that just growth won’t be enough.

“Yes, my value on the stock market may go up because some people may get excited (with quarterly profits) and that there will be more. That’s stupidity, I am not here to fool people. That’s not my job — I am here to build a fantastic company,” he said.

In line with the same philosophy, he said he had told its anchor investors, during the pre-IPO conversations, that it would be a “waste of time” to review the company from quarter to quarter. “That’s the kind of management we are as we are building it for the next five-10 years.”

The company’s revenue from operations increased more than 35% to Rs 237 crore in the June quarter of fiscal 2022 compared with a year earlier. Its loss for the quarter widened 85% year-on-year to more than Rs 110 crore.

“We will not be stupid. We have built Policybazaar and Paisabazaar with $150 million. We are not frugal, but we don’t waste it (either). I think our behaviour will not change in future either and it will be similar,” he said, reiterating the company’s long-term plans to chase growth and scale new businesses.

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While selling insurance is its core business, PB Fintech houses lending business under Paisabazaar and is experimenting with the expansion of its business in markets like Dubai besides setting up offline presence to bring a higher number of users to its fold. Dahiya said it was the idea of its new chief executive, Sarbvir Singh, to go offline and that it was his (Dahiya’s) mistake to not have done this earlier.

The offline presence would result in much higher conversion for users to buy insurance, he said.

“We will keep building efficiency in core areas and will keep doing experiments. Our core area is profitable already. A simple way to do that is to shut down all experiments and we will be profitable straight away but that’s not right for the company and in fact we will double down on the experiments,” Dahiya added.

According to him, these experiments will not create profits for the company now but will add phenomenal value in the next five to 10 years. But, it won’t go “berserk” on expenses. “I am confident of profitability because of the renewal book. So, profits are already there, and it takes a closer eye and that’s what institutional investors have seen.”

PB Fintech, going forward, will stay focused in two large areas: insurance and credit. “Paisabazaar already gets double the traffic than Policybazaar. So, there is a lot of data access from there towards financial products. We may or may not do something on the investment side, but we keep looking and that doesn’t mean we will do it,” he said.

PB Fintech is also building a better claims platform. Paisabazaar does lending through partners and not through its own books.

“I think, over a long term, it will be stable (revenue wise) with Policybazaar and growth rate will be similar because lending is an equally big opportunity,” Dahiya said, adding that credit is a relatively easier industry as more consumers look for lending products compared to insurance.

While Policybazaar sells insurance products of all companies, the company may consider partnering with insurers to create new products for consumers. Policybazaar, he said, has to find a way to create products.

“There is no way out of that. We have to figure out how. We have to have the ability to create products for our consumers,” he said, adding: “Whether our partners do it or we do it — we don’t know.”

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