Digital payments company Paytm is in talks to acquire Mumbai-based online insurance platform Coverfox for $100-120m in an all-cash deal, said two people aware of the matter.
If the transaction goes through it will be the largest acquisition by Paytm, which is making inroads into the financial services segment. This will also see Paytm emerge as a direct competitor to the country’s largest online insurance marketplace PolicyBazaar, reported Economic Times.
SoftBank Vision Fund, a large investor in Paytm's parent One97 Communications, is also a significant shareholder in PolicyBazaar, which may pose challenges to the deal, people close to the development said. “The Paytm board is in the process of finalising the contours of the deal,” said one of them.
“There is still a chance that it may fall through as the board deliberates on the pros and cons of the transaction,” the person added.
Founded in 2013 by Varun Dua and Devendra Rane, Coverfox has been in talks to raise a $50m series D round even as the acquisition talks have been going on in parallel, another source said. In all, Coverfox has raised around $40m in capital. Last year in April, Coverfox raised $22m in a Series C funding round led by IFC, a member of the World Bank Group, Transamerica and other existing investors. It had earlier raised $17m in Series A and B funding from SAIF Partners, Accel and NR Narayana Murthy’s private investment arm – Catamaran Ventures. These shareholders are expected to exit their investments if the deal takes place. SAIF is a common investor in Paytm and Coverfox.
Mr Dua left in 2017 to head Acko, a new-age insurance firm that competes with the likes of Digit Insurance, which is backed by Canadian billionaire Prem Watsa’s Fairfax Holdings.
Coverfox offers both life and non-life insurance policies. It has 50,000 agents and offers products from 45 insurance companies. The company sold premiums worth $100m through its platform and generated $22m in revenue with a million transactions done last year.
In an earlier conversation with Economic Times, Mr Vijay Shekhar Sharma who leads Paytm said that insurance is a big area of focus for the company and it will look to expand its personal finance portfolio to shore up margins currently lacking in its core digital payments business. Paytm is already a registered corporate agent for all forms of insurance products. Last year, Paytm incorporated two insurance companies, Paytm Life Insurance Corporation and Paytm General Insurance Corporation.
Paytm also said that it currently processes more than 400m transactions for merchants.