Digit Insurance files DRHP for Rs 1,250Cr IPO

Insurtech unicorn Digit Insurance has filed the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for its Rs 1,250 crore initial public offering (IPO).

The IPO will contain an offer for sale (OFS) of 10.94 crore shares from existing shareholders.

"The proceeds from the issue will be used for augmentation of our capital base and expansion of business and improving solvency margin and consequently solvency ratio," the company said in the draft papers.

Digit Insurance has not clarified the IPO dates in the draft prospectus. However, it is likely that the IPO will open after October 2022 as the regulator Insurance Regulatory and Development Authority (IRDAI) mandates insurtech companies to be at least five years old before going public.

As per this rule, Digit Insurance would be eligible for going public post-October 2022, as it was founded in October 2017. 

The company may sell around Rs 250 crore of shares in a pre-IPO placement; share sales in the IPO will be lower if the pre-IPO happens, it said in DRHP.

“If the pre-IPO placement is undertaken, the fresh issue size will be reduced to the extent of such pre-IPO placement,” it added.

Who is selling stake (through the offer of sale)?

Promoter entity Go Digit Infoworks Services Private Limited, Nikita Mihir Vakharia, jointly with Mihir Atul Vakharia, Nikunj Hirendra Shah, jointly with Sohag Hirendra Shah and Subramaniam Vasudevan, jointly with Shanti Subramaniam will be selling stake in the company through the offer of sale.

Digit's shareholding pattern

Go Digit Infoworks-- 83.65 %

A91 Emerging Fund—3.36%

TVS Shriram growth fund—3.56%

Faering Capital India Evolving fund II—2.14%

Faering Capital India Evolving fund III—1.22%

Wellington Hadley Harbor—1.49% 

SCI Growth investment fund—1.04%

Currently, Go Digit Infoworks holds a majority stake in Digit Insurance. Shareholders of Go Digit Infoworks include Kamesh Goyal, Oben Ventures (Kamesh+Sameer Bakshi’s company), and FAL Corporation (part of Watsa's Fairfax Holdings).

Bengaluru-based Digit Insurance, which began its journey in October 2017 to sell primarily motor and travel and property insurance a, turned unicorn last year. Today, it offers insurance policies in multiple verticals and claims to have served over 20 million customers across the car, bike, health, and travel insurance segments.

The Fairfax-backed insurance company is founded by insurance veteran Kamesh Goyal. Among Digit’s investors are TVS Capital Funds, A91 Partners, Indian Cricket Team Captain (Men’s) Virat Kohli, and the employees of Digit.

Digit Financials

The startup's latest valuation stands at $3.58 billion.

Profile and loss: For FY22, Digit reported a net loss of Rs 295.86 crore in FY22 versus Rs 122.76 crore last year.

Total assets under management (AUM): increased 68% in FY22 to Rs 9393.88 crore from Rs 5590.10 crore a year ago.

Gross Written Premiums (GWP): Stood at Rs 5,267.63 crore from Rs 3,243.39 crore the corresponding year.