The insurance regulator has approved Go Digit’s plan for a public share sale, two people aware of the development said, after faulting the digital insurer last year over a non-disclosure.
The approval from the Insurance Regulatory and Development Authority of India (Irdai) clears one key hurdle for the Fairfax-backed company on the road to its ₹1,250 crore initial pubic offering (IPO).
The company is now waiting for approval from the Securities and Exchange Board of India (Sebi) for the initial public offering (IPO), the people cited above said on condition of anonymity, adding that they expect approval soon enough.
In November, Digit General Insurance, which runs Go Digit, filed an addendum to its IPO documents, stating that Irdai had issued it a show-cause notice related to its “non-disclosure of change in the conversion ratio of the compulsorily convertible preference shares, issued to Fairfax.”
The company is likely to go public in the first half of 2024, one of the two people cited above said.
This is Go Digit’s second attempt at a IPO. In January 2023, Sebi had returned its offer document, making observations on the lock-in period for promoters and shareholders, and its employee stock options. Go Digit rectified these issues and refiled the offer document on 6 April.
Queries emailed to the spokespersons of Fairfax, Go Digit and Irdai remained unanswered.
Founded by Kamesh Goyal in 2016, Go Digit General Insurance Ltd offers motor, health, travel and property insurance among other non-life products. Last year, it received Irdai’s permission to start Go Digit Life Insurance Ltd, which would make it the 25th life insurance company in India.
Go Digit had raised capital at a valuation of $3.5 billion in 2021; however, this came under scrutiny last week when short seller Muddy Waters Research claimed that Fairfax had overstated its book value by $4.5 billion, including its investments in Go Digit and Quess Corp. It said Go Digit was valued at only $1.5 billion, less than the $3.5 billion valuation. Fairfax refuted all claims made by Muddy Waters in statements issued on 8 and 12 February.
An analyst report by National Bank of Canada said “the proposed adjustment included in the Muddy Waters report for Go Digit, Recipe, Quess and Grivalia are likely overstated.”
“While a value-surfacing transaction may not materialize at the previous $3.5 billion financing round valuation, the Indian stock market is delivering strong performance on a broad basis,” the report said, referring to Go Digit.
Back home, Digit is likely to be valued around $3 billion when it hits the public markets, the second person cited above said. “The public market valuations have been robust. The company is aiming anywhere between $2.5 billion and $3 billion in valuation,” he added. It has so far raised around $544 million in funding across various rounds, data from Tracxn shows. Apart from Fairfax, it counts A91 Partners, Faering Capital and TVS Capital among its investors.
The company has been growing steadily and is profitable. In FY23, its revenues grew to ₹5,164 crore against ₹3,404 crore in the previous fiscal, while profit grew to ₹338 crore from ₹50 crore.
Digit’s IPO comprises a fresh issue of shares worth ₹1,250 crore and an offer for sale of 109.45 million shares.