Policybazaar's anchor lock-in period ends; should you buy, sell or hold?

Shares of Policybazaar (listed as PB Fintech Limited) tanked 5 per cent to hit an all-time low of Rs 1,076 on the Bombay Stock Exchange (BSE) as the 30-days lock-in period of anchor investors ended on Monday.

However, the stock ended 1.80 per cent higher at Rs 1,153.35 against the previous close of Rs 1,132.95. Market cap of the firm rose to Rs 51,843.06 crore on the BSE.

Anchor allotment is done a day before the initial public offering and provides an insight into the demand and quality of the issue. Only institutional investors are qualified to subscribe under the anchor quota. The investors can sell their holdings after the lock-in period ends.

The company had garnered a little over Rs 2,569 crore from anchor investors a day ahead of its IPO. A total of 155 anchor investors, including leading insurance firms such as HDFC Life, ICICI Prudential, Bajaj Allianz Life, SBI General Insurance, and Max Life Insurance, had put in bids for the allocated slot.

According to Manoj Dalmia, founder and Director at Proficient Equities Limited, lock-in is usually kept to prevent excessive selling in the stock, and its end doesn't necessarily mean anchor investors will exit.

He added that one can start accumulating the stock at the price of Rs 980 as this seems to be a decent level. If an investor wants to play defensive, then it's better to wait for next quarter earnings and then proceed.

"While profitability is some time away we believe the company should be able to deliver more than 30 per cent revenue CAGR going forward. The current valuation of the company is on the higher side. We do not foresee significant upside from the current levels over the next 1 year or so and hence would advise investors to wait for better valuation to make an entry," Divam Sharma, founder of Green Portfolio, told BusinessToday.in.

However, he noted that the dual distribution strategy, which includes an online web portal and physical PoSP agents, presents a larger opportunity going forward. The online channel only accounts for less than 1.5 per cent of the total insurance premium in FY21 due to the complex nature of the product. Hence, physical will allow the company to capture larger opportunities and ensure high growth going forward. This will also allow the company to make commissions on renewals of life insurance policies (not allowed in web aggregator model).

He further added that operating leverage, a larger renewal base and tech investments will lead to improved margins and profitability going forward.

Shares of Policybazaar had made a decent debut on Dalal Street. The scrip had listed at a premium of 17.34 per cent at Rs 1,150 on the NSE against the issue price of Rs 980. The issue had got subscribed 16.58 times on the last day of the offer on November 3.

The portion allocated for qualified institutional buyers was subscribed 24.89 times, retail investors subscribed 3.31 times, and that for non-institutional investors saw 7.82 times subscription.

PB Fintech Ltd, the parent firm of Policybazaar, had received Sebi's nod for the IPO on October 19. PB Fintech also owns Paisabazaar.