Virat Kohli-endorsed Digit Insurance has filed for draft papers with the market regulator Securities Exchange Board of India (SEBI) to raise funds through an IPO.
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Offer for sale
It is looking to raise Rs 1,250 crore via a fresh issue.
The IPO will contain an offer for sale (OFS) of 10.94 crore equity shares from the promoter group.
The total size of the IPO could go much higher if the OFS component — the shares that promoters of the company will offload — is accounted for.
Kamesh Goyal, Go Digit Infoworks Services Private Limited, Oben Ventures LLP and FAL Corporation, which is part of Fairfax holdings are among the company’s promoters.
The company is aiming for a valuation of $4.5 billion to $5 billion.
Currently, Go Digit Infoworks Services Private Limited, the holding company of Digit, has 83.65% stake in the company.
It is followed by A91 Partners, TVS Capital Funds and Faering Capital with 3.36% stake each.
Wellington Hadley and Sequoia Capital hold 1.49% and 1.04% respectively.
Utilization of the funds
Digit will utilize the net proceeds to shore up its balance sheet and maintain cash reserves which SEBI requires of insurance companies.
It also needs to increase its capital base to meet future capital requirements and maintain its solvency levels.
The company was founded in 2017 and is backed by Canadian billionaire Prem Watsa’s Fairfax Group.
Founder Kamesh Goyal is a veteran of the insurance industry who worked with Germany’s Allianz and headed its Indian joint venture.
Widening general insurance market
Digit seeks to take advantage of India’s under-penetrated general insurance market along with providing a better customer experience like easier claim settlements.
It’s also the highest valued startup in this segment followed by its competitor Acko which turned unicorn in October last year.
Indian cricket star Virat Kohli is an investor and its brand ambassador.
Heavy losses
Its total income rose 75% to ?3,841 crore in FY22 from ?2,251 crore in fiscal 2021.
However, it recorded a net loss widened 140% to Rs 296 crore in FY22 as compared to Rs 123 in FY21 and Rs 175 crore in FY20.
The company itself admitted that they “have a track record of reporting losses, and we may not achieve profitability in the future.”
In dire straits
The numbers speak for itself- the company is in dire need of the capital to compensate for losses in the three consecutive fiscal years.
Insurance regulations mandate that companies in the sector be at least five years old before going public, which Digit will fulfill by September.
The IPO will be managed by Morgan Stanley and local investment banks ICICI Securities, Axis Capital, Edelweiss Financial Services, HDFC Bank and IIFL Securities.
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