SoftBank ups stake in PolicyBazaar despite the InsurTech’s CEO claiming the previous investment was a “mistake”

Insurance marketplace PolicyBazaar has reportedly raised a further $130m from SoftBank, despite the chief executive believing the previous expansion efforts led by the mega investor were a “mistake.”

SoftBank has allegedly tapped its $100bn Vision Fund to acquire another $130m stake within the Indian InsurTech platform, according to a report from Times of India. This deal expects to give SoftBank more than a 15% stake in the business, making it the second largest stakeholder.

This new deal is comprised of a $50m capital infusion and an $80m purchase of shares. The report claims the shares were bought off of Ribbit Capital, Inventus Capital India and Tiger Global Management.

These secondary shares were reportedly bought by SoftBank at a premium to the valuation of $1bn, the article claims.

While SoftBank now holding a decent chunk of shares in PolicyBazaar, the InsurTech’s CEO is saying previous investment was a mistake.

A new article from the Financial Times claims PolicyBazaar CEO Yashish Dahiya believes the expansion pushed by investors include SoftBank was a “mistake” and led the InsurTech to run at a loss.

The expansion push referred to by Dahiya came after PolicyBazaar closed a $200m Series F in 2018, which was led by SoftBank and supported by other existing backers of the InsurTech.

According to the report from the Financial Times, the capital was put to work by increasing its capacity by hiring staff for its call centre and operations in a bid of winning more users. However, Dahiya has spoken out to say this was the wrong strategy.

He told the FT, “There wasn’t… rational thinking about it. We had a lot of capital, a lot of capital, and there was a lot of push from our investors.”

In order to get more customers, Policybazaar funnelled money into its advertising and promotion efforts. When the customer levels did not grow as hoped, the company began to run at a loss.

He said that the issue was suddenly doubling the capacity is not helpful, but they have since learned from this.

PolicyBazaar is hoping to return to profitability by the end of this year, after it has reduced its marketing efforts and is instead focused on its core products.

With the coronavirus putting pressures on companies, Dahiya doesn’t believe it will cause the fall of companies. Instead, he thinks the industry shakeout is natural and was inevitable regardless of the pandemic.

PolicyBazaar offers an online marketplace for health, car, home, travel and child insurance policies, among others. Users can compare more than 250 plans and are fully supported with cancellations and endorsements.

The parent company of PolicyBazaar is EtechAces Marketing and Consulting, which is reportedly valued at $1.5bn.

PolicyBazaar is planning on going public in 2021.

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