SES Raises Concerns Over PB Fintech’s Merger & ESOP Deal

Proxy advisory company Stakeholders Empowerment Services (SES) has raised concerns over Policybazaar’s parent PB Fintech’s merger and ESOP deals. It has sought clarifications from PB Fintech’s board on its merger with MakeSense Technologies and a grant of ESOP stock options, which took place last year.

In April last year, PB Fintech’s board of directors approved its merger with MakeSense Technologies. However, the company did not carry out the merger and later, its board approved the withdrawal scheme of merging, in September last year, stating that the scheme was withdrawn in the best interest of the company and its shareholders.

Following this, PB Fintech filed a withdrawal application with the National Company Law Tribunal. PB Fintech, in April, again shared the proposition of merging with MakeSense Technologies with its board of directors, which then received approval again.

Observing this, SES has asked PB Fintech’s stakeholders to get clarification from the company as to why the amalgamation scheme was initially proposed, then withdrawn and then proposed anew.

Besides, SES also assessed PB Fintech’s annual report for the fiscal year 2022 and highlighted that in the annual report, the company has mentioned that it granted 7.1 Mn+ stock options under its ESOP 2021 programme. However, in the DRHP prospectus, the company said that no stock options were granted.

In its note, SES said, “We wonder if the valuation of the company played any role in withdrawing the NCLT application just before the IPO. However, the exact reasons for the withdrawal are only known to the company. Even its Final Prospectus is silent on the reasons for such withdrawal.” 

SES estimated that unless MakeSense Technologies’s valuation also declined akin to PB fintech, the board’s special resolution will turn favourable for founders that have more shares issued in PB Fintech.

“SES is of the view that the Company (PB Fintech) ought to have made disclosures behind the reasons for the initial withdrawal and subsequent reapplication in its annual report,” SES added. 

PB Fintech’s annual general meeting (AGM) will take place on September 26 this year. 

At the time of reporting, PB Fintech’s shares were trading INR 493.80 at BSE as on 23rd September, 3:05 PM.

It is important to note at the time of IPO listing, PB Fintech’s shares were priced at INR 1,150 apiece. However, in less than a year, its share price has tanked more than half and the fintech startup along with other new-age companies have wiped out investors’ wealth from the capital market. 

The latest development comes weeks after Policybazaar’s parent granted ESOPs worth INR 1,044.13 Cr to its three top executives. 

In the first quarter of FY22-23, PB Fintech’s losses stood at INR 204.33 Cr whilst its revenue from operations were at INR 505.18 Cr. 

Meanwhile, in the financial year 2021-22, the startup posted losses at INR 832.91 Cr, up by 454% from INR 150.24 Cr in the previous year. Meanwhile, its revenue increased by 60% to INR 1,424.89 Cr in FY21-22.

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