Go Digit's Kamesh Goyal says, 'We took investor feedback to decide the IPO price, hope to give them value'

However, majority of them took a stock market beating and continued to trade below their issue price for some time before recovering. This even had a knock-on effect on other startups like Oyo Rooms, PharmEasy and Mobikwik which deferred their IPO plans.

After hitting multiple hurdles over compliance issues which delayed approval for its public offer, Go Digit General Insurance is looking to hit the bourses to raise Rs 2,614 crore next week. The company had first filed its draft papers for the IPO in August 2022.

The Prem Watsa’s Fairfax group-backed firm has fixed its price band in the range of Rs 258- 272 per share of the face value of Rs 10.

Digit was valued at $3.58 billion (as of 2022-23) in the last private round. The issue price values the company at a little less than $3 billion.

Source: Company RHP

The insurtech firm, which has downsized its issue by more than 40 percent, is seeking to raise primary capital of Rs 1,125 crore instead of the earlier planned Rs 1,250 crore.

The offer for sale (OFS) has also been slashed by almost 50% from 109.4 million shares to 54.8 million shares (worth Rs 1489.62 crore).

While the primary capital raised is used to fund the business operations and expansion, the OFS is typically to allow existing investors to sell shares and realise profits.

Key performance metric Go Digit General Insurance

On the reduced issue size, the Chairman said, “Our primary offering was Rs 1250 crore initially. Because IPO got delayed and we raised non-convertible debentures worth Rs 200 crore. So our overall requirement for capital went down.”

As per the RHP, the Board of directors on December 11, 2023, had approved raising of capital by issuance of Non-Convertible Debentures (NCDs) upto Rs 2,000 million (Rs 200 crore) on a private placement basis.

Longer gestation period

Reiterating on the growth numbers since the last six years, Goyal said the company has managed to achieve profitability, even as the gestation period of hitting the same in insurance sector is typically longer.

Digit competes with the likes of Acko which posted a revenue of Rs 1,759 crore with a loss of Rs 738 crore during FY23, besides other established players.

With a higher revenue of Rs 5,164 crore, Digit posted an operating loss of Rs 10 crore for the nine month ending December 2023, compared to Rs 57 crore previously.

For the nine months ending December 2023, Digit sharply brought down its operating loss to Rs 10 crore, while Profit After Tax (PAT) stood at Rs 129 crore. The total income was Rs 5750 crore.

“This (loss) is small at operating level and not meaningful to impact our services. Most of our business is retail, so expenses will be high. If you look at our AUM in the last 6 years, it has been more than 15 percent of some of the top 5 companies,” the chairman said.

He further added saying, “When you are growing fast, it leads to losses, because your commission expenditure has to be expensed out on day 1 while revenue is earned over a period of 365 days.”

Going forward, Digit is pitching heavily on its health insurance business, fastest growing category, with premiums doubling over the years.

“Our health (insurance) business has doubled over the years. The loss ratio was good at a time when everyone was losing. We doubled our premium in one year. In three years, it will be fastest growing category for us,” Goyal said.

Go Digit General Insurance IPO has reserved not less than 75 percent of the shares in the public issue for qualified institutional buyers (QIB), not more than 15 percent for non-institutional Institutional Investors (NII), and not more than 10 percent of the offer is reserved for retail investors.