Digit Insurance Files for IPO to Raise Rs 1,250 crore

Digit Insurance IPO Date Soon?

After being declared as one of the first unicorns in India in July last year, Digit Insurance is now all set to launch its IPO with a total size expected to be about Rs. 5000 crores. The digital insurance company has already drafted its IPO documents with an intention to raise around Rs 1250 crores through a fresh issue of shares. Also about Rs 10.94 crores through offer for sale of its equity shares.

Last year the Insurance company had raised about $200 million from investors such as the  IIFL Alternate Asset Managers, Sequoia Capital India and Faering Capital at a valuation of $3.5 billion. As mentioned in the reports, Digit Insurance has taken the step to launch its IPO as a calculative approach to use the proceeds from this issue to help the company elevate its capital structure. It also intends to step up its solvency levels for business expansion. 

Let us explore all the nitty-gritty related to the Digit Insurance IPO with further discussion.

Summary in Brief

• Understanding the background of Digit Insurance.
• Learning about the fundamentals of Digit Insurance IPO.
• Exploring the pros and cons of investing in Digit Insurance IPO.
• FAQs

About Digit Insurance 

Digit Insurance is a new-age start-up that has been backed by the Canadian billionaire, Prem Watsa's Fairfax Group. The company was founded back in 2017 to capitalize on the country’s under-explored general insurance market. Digit Insurance also approaches to refine the customer experience with a user-friendly interface for convenient claim settlements. 

Digit was founded by Kamesh Goyal, a veteran of the insurance industry and a former head of Germany's and Indian Allianz joint venture. This insurance company has also been backed by its inventor and brand ambassador, the Indian cricket star Virat Kohli.

Digit Insurance IPO: Financial data

Exploring the financial record for the year 2021-22, of the now private company. The total income of Digit Insurance has hiked to ₹3,841 crores in the current FY 2022 from ₹2,251 crores in FY 2021. At the same time, the company has also widened its net loss to ₹295 crores in FY 2022 from ₹122 crores in FY 2021. 

The current promoters of Digit Insurance are Go Digit Infoworks Services Private Limited with a current holding of about 83.65% in the company. The other promoters include the founder- Kamesh Goyal, FAL Corporation, and Oben Ventures LLP. 

Please take a note of the other required information related to Digit Insurance from the following table. 

Digit Insurance IPO: Key Metrics

Note: The above information is as of March 2022 

All About Digit Insurance IPO

Digit Insurance is a general insurance start-up that provides motor, health, travel, fire and other small-ticket insurances. The company is now all set to line up for its initial public offering and has already filed the draft red-herring prospectus and other necessary documents with the Securities and Exchange Board of India (SEBI).  Here's what you must know about the upcoming Digit Insurance IPO

Digit Insurance IPO: Promoters and Selling Shareholders

• Go Digit Infoworks Services Private Limited
• Nikita Mihir Vakharia jointly with Mihir Atul Vakharia
• Nikunj Hirendra Shah, jointly with Sohag Hirendra Shah
• Subramaniam Vasudevan, jointly with Shanti Subramaniam

Digit Insurance IPO is Managed By:

• Morgan Stanley along with local investment banks 
• ICICI Securities
• Axis Capital
• Edelweiss Financial Services
• HDFC Bank 
• IIFL Securities.

Digit Insurance IPO: Other Related Information

• As per the recent reports and claims by Digit Insurance, the company has proposed in its offer document the reason to raise the IPO that it shall be utilizing the net proceeds to accentuate its balance sheet. 
• It also intends to maintain its cash reserves as required by the regulator for insurance companies through this public offer sale.
• The company has also declared to sell around ₹250 crores of shares in a pre-placement offer in its IPO. Thus, implying that the share sale in the issue shall be effectively lower.
• It is also reported that the promoters are to cut down their stakes to fuel the IPO. Go Digit Infoworks shall  trim their holdings by 10.9 crore shares, Nikita Vakharia and Mihir Vakharia are to do the same for upto 4,000 shares. The shareholders Nikunj Shah and Sohag Shah shall cut upto to 3,778 shares. While Subramaniam Vasudevan with Shanti Subramaniam  is all set to cut up to 3,000 of their equity shares.

Should you Invest in the Digit Insurance IPO?

Digit Insurance’s IPO has been called a fresh wave of an interesting approach by some investment analysts, amid the IPO failures of most new-age companies like Zomato and Paytm. The reason being unlike these companies, the digital insurance company comes across as being operating in a startup space that is mostly dominated by older, and more established corporations. However, similar to Zomato and Paytm, the insurance company is also one-loss making company as per its financial reports.  

Digit Insurance IPO: Worth Considering?

Now if we compare its financial position for the fiscal year 2021 and 2022, this new-age insurance start-up, Digit insurance, has reported an increase of about 68% in its AUM from Rs 5,590.1 crores in FY 2021 to Rs 9,393.8 crores in the FY 2022 . Also the company claims its gross written premium (GWP) to stand at Rs 5,268 crore in the current FY 2022 with a growth of around 38.4% from the last fiscal year. 

The company has also managed to significantly decrease its net expense ratio to 38.7% in the current financial year as of March 2022 from 35.4% of FY 2021. Currently the company also has a strengthened capital position through a solvency ratio of about 2.01 as of 31 March, 2022. 

Given the fate of loss making new-age startups post listing, it would be better to await more details such as the price band to take a call on valuations. We shall come out with a detailed review, once more details are available.