India’s Digit Insurance, backed by Canadian billionaire Prem Watsa’s Fairfax Group, plans to raise about $500 million in an initial public offering worth $4.5 billion to $5 billion, it said. to Reuters three people familiar with the case.
Founded in 2017, Digit is trying to capitalize on India’s underpenetrated general insurance market as well as users’ need for better customer experience such as easier claims settlement, although IPOs in the countries have not performed well in recent months.
Digit has appointed Morgan Stanley and Indian investment bank ICICI Securities as bookrunners for the deal. It plans to file its draft documents with the market regulator by September and list by January, said the people, who requested anonymity because they were not authorized to speak to the media.
Indian LIC shares slump after record high, but disappointing IPO
A Digit spokesperson declined to comment on the “speculations”. ICICI also declined to comment while Morgan did not respond to emails seeking comment.
Digit was valued at nearly $4 billion at the start of the month when it raised a funding round. It has so far raised over $400 million from Sequoia Capital, A91 Partners and Faering Capital, in addition to Fairfax.
India’s largest public offering – state-owned Life Insurance Corp. – fell 7.8% on its debut this month after raising $2.7 billion, well below its original plan of $12 billion. Fintech company Paytm also plunged on its debut last November after a $2 billion IPO.
Indian start-ups have also struggled to raise funds privately this year after a boom in 2021.
India’s insurance regulator requires companies in the industry to be at least five years old before going public, which Digit will meet by September. Digit plans to raise funds by offering new shares with Fairfax, its largest shareholder with about 30%, by reducing its stake, the people said.
Fairfax could not immediately be reached.
Digit founder Kamesh Goyal is an insurance industry veteran who worked with Germany’s Allianz and ran its Indian joint venture. Indian cricket star Virat Kohli is an investor and brand ambassador.
Non-life insurance penetration in India was just 0.94% in 2020/21, down from 0.56% around 20 years ago, according to data from the Insurance Regulatory and Development Authority of India. .
Digit has served more than 20 million customers in auto, bike, health and travel insurance, according to its website.
Its revenue jumped 62% to around $675 million in the last fiscal year, beating the industry’s 11% increase. The company recorded a net loss of $7.8 million on revenue of $309 million in 2020/21, but its latest profit or loss could not be immediately determined.
Digit is among the few startup unicorns in India – a term for companies valued at over $1 billion – that are profitable or close to profitability, one of the people said.
Bankers say demand for Digit’s IPO will depend on how it values its stock, in addition to macroeconomic factors. Inflation fears and rising interest rates are weighing on IPO demand in India and abroad.
“Digit is growing rapidly, so by the time they start talking to investors about the IPO, the $4 billion valuation will look outdated,” one banker said. “Given they don’t burn cash, it’s an attractive proposition for institutional investors.”
(Reporting by M. Sriram; Editing by Krishna N. Das and Stephen Coates)
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India
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