Fintech is going like hotcakes at the moment in the Indian startup ecosystem. In fact, it’s been this way since the November 2016 demonetisation in India. Besides pushing people towards cashless transactions, Prime Minister Narendra Modi’s masterstroke opened the floodgates of opportunities for companies to unleash a never-ending wave of digital financial products on Indian consumers.
Riding on the wave of increased financial transactions and the digital push in the economy, online insurance aggregator PolicyBazaar registered a standalone growth of 383% and consolidated growth of 331% (along with PaisaBazaar, the loan and credit card aggregation platform of PolicyBazaar).
PolicyBazaar started its operations in 2008 as a web aggregator and comparison website for insurance products. Later, in February 2014, it started PaisaBazaar — its financial advisory platform — thereby marking its entry in the digital lending space.
A few weeks earlier, we analysed the financial performance of another leading fintech player BankBazaar. While BankBazaar clocked a revenue of INR 71.16 Cr ($10.38 Mn) in FY17, it showed little growth compared to FY16. With an almost 4X growth and a consolidated income of INR 76.45 Cr ($11.15 Mn) in FY17, PolicyBazaar has caught up with BankBazaar.
While BankBazaar offers insurance, credit card, and loans on a single platform, PolicyBazaar offers insurance on the PolicyBazaar platform and loans and credit cards on PaisaBazaar. It is interesting to note how PolicyBazaar, by selling insurance through one platform and loans and credit cards through another has been able to clock a higher growth rate than BankBazaar.
This prompted us to look at the financials of the PolicyBazaar and PaisaBazaar separately to assess the extensive growth registered by the company.
Deep Dive Into The Financials
Standalone Analysis Of PolicyBazaar
Founded in 2008, PolicyBazaar enables users to compare life insurance and general insurance products. The startup features products of all major insurance companies in India on its platform to help its users decide which policy suits them best.
PolicyBazaar, the newest unicorn in India, has raised $364 Mn till date from investors such as InfoEdge, SoftBank, Tiger Global, Temasek etc.
The PolicyBazaar platform posted an operating income of INR 48.74 Cr ($7.12 Mn) in FY17, a 383% increase from INR 10.08 Cr ($1.47 Mn) in FY16. At the same time, it posted net expenses of INR 89.44 Cr ($13,06 Mn) in FY17, a 104% increase from INR 43.8 Cr ($6.4 Mn) in FY16.
Standalone Analysis Of PaisaBazaar
In February 2014, PolicyBazaar forayed into the loan and credit card aggregation space through its new platform, PaisaBazaar, another online marketplace.
In FY17, PaisaBazaar posted an operating income of INR 27.16 Cr ($3.96 Mn), 252% more than INR 7.72 Cr ($1.128 Mn) in FY16. The company increased its expenses in FY17 to INR 50.74 Cr ($7.41 Mn) from INR 18.72 Cr ($2.736 Mn) in FY16.
In FY17, PolicyBazaar’s total income was INR 49.01 Cr ($7.16 Mn) against an operating loss of INR 40.7 Cr ($5.94 Mn) in the same period. In the previous year — FY16 — it had a total income of INR 10.37 Cr ($1.51 Mn) against an operating loss of INR 33.72 Cr ($4.92 Mn).
PaisaBazaar recorded a total income of INR 27.44 Cr ($4.01 Mn) and an operating loss of INR 23.29 Cr ($3.4 Mn) in FY17. In FY16, it posted a total income of INR 7.79 Cr ($1.13 Mn) against an operating loss of INR 11 Cr ($1.6 Mn).
PolicyBazaar’s Consolidated Revenues and Expenses
For FY17, PolicyBazaar as a whole projected a growth of 331% compared to FY16. In FY17, PolicyBazaar’s total income was INR 76.45 Cr ($11.15 Mn) against an expense of INR 140 Cr ($20.43 Mn). It’s revenue was higher than that of BankBazaar, which recorded INR 71 Cr ($10.36 Mn) for FY17.
What’s Driving PolicyBazaar’s Growth
While examining the line items of expense of these PolicyBazaar and PaisaBazaar, we noted some points of interest:
- While PolicyBazaar increased its employee benefit expenses in FY17 by 93% (from FY16) to INR 57.56 Cr ($8.41 Mn) for its nearly 1,898, PaisaBazaar’s employee benefit expenses increased to INR 20.41 Cr ($2.98 Mn) for its 1,300 employees, an increase of 95% over the previous year.
- Reports have surfaced that PolicyBazaar is planning to increase its headcount. Further, it must be noted that PolicyBazaar spends 64% of its total expenses on employee benefits while PaisaBazaar spends 40% of its total expenses on the same.
- PolicyBazaar increased its advertising expenses by 73% to INR 10.08 Cr ($1.47 Mn) in FY17 while PaisaBazaar’s ad spend in FY17 was INR 22.60 Cr ($3.30 Mn), a 326% increase from FY16. PaisaBazaar seems to be banking heavily on advertising, as its ad spend was 45% of its total expenses, against just 11% in the case of PolicyBazaar.
According to the government’s Make In India data, India boasts 600 fintech startups at present. Some startups are causing disruption in this increasingly competitive space by introducing revolutionising solutions in the market.
The rising penetration of the Internet and smartphones has provided a boost to the fintech industry. Constant innovation by fintech startups urged the government to give the necessary impetus to the sector for the first time in the Union Budget 2018.
According to a market research report by The Ken, total online loan disbursement in India between 2014-2016 increased at a CAGR of 68.8%.
Going ahead, the overall fintech sector is expected to reach $500 Bn by 2020. The growth is being spearheaded by digital lending startups and platforms offering price comparison of wealth management products. And with everyone making a beeline for fintech, competition is heating up in the space.
With deep-pocketed players such as Paytm dominating digital payments and Indian ecommerce giant Flipkart looking to enter consumer lending, players such as BankBazaar, PolicyBazaar, and Paisabazaar need to keep an eye on their balance sheets, as survival of the fittest is the only adage that applies to this cut-throat market.
[This is part of the What The Financials (WTF) series of Inc42 Datalabs, in which we explore the financial health of startups and discuss their key metrics of growth. The data has been taken from MCA filings. To read more articles click here.]
Update: July 14, 2018, 3pm: This article was updated to correct some errors in the interpretation of financial data and the headline was changed.