The brokerage has initiated coverage on the online insurance broker with a “hold” rating and a price target of Rs 1,270, which implies a nearly 5 per cent downside from the current market price.
The brokerage firm believes that PolicyBazaar could command a market capitalization of $13.5 billion over the next two years as compared to the current market cap of nearly $8 billion, “provided a few incremental levers fall into place (unlikely in the very near-term, in our view)”.
Those levers consist of digital penetration reaching 5.5 per cent as against 4.5 per cent assumed by the brokerage, LIC distributing its product through the online platform and arm PaisaBazaar becoming a dominant player in the credit marketplace segment.
“Policybazaar is the dominant market leader in a large and growing industry with strong tailwinds such as increasing digital penetration, rising disposable income and insurance awareness,” the brokerage firm said.
JM Financial said that the company should continue deepening its scale moats in light of new competition emerging from direct channels used by insurers and cross-selling other fintech companies like Paytm and PhonePe.
The brokerage firm expects PB Fintech, PolicyBazaar’s parent, to grow revenues by 31 per cent annually over the next 10 years. “We believe Policybazaar will be in the driving seat in enhancing insurance penetration in India,” JM Financial said.
Shares of PB Fintech ended 11 per cent higher at Rs 1,334.9 on the National Stock Exchange.
