IPO-bound Go Digit General Insurance's promoters do not want to sell more shares - an unlikely trend for startups and tech IPOs - as a result of which the insurance-tech player has had to pare down the size of its offer for sale (OFS) by almost 50 percent, chairman Kamesh Goyal said on May 13.
"The cut happened more on the offer for sale because most of our promoters did not want to sell more. You don’t see promoters not wanting to sell but we were the other way round," Goyal said during a media briefing in Bengaluru.
The insurtech firm has downsized the issue by more than 40 percent, and is seeking to raise primary capital of Rs 1,125 crore, slightly less than what was planned earlier. The offer for sale (OFS) portion of the issue been slashed by almost 50% from 10.94 crore shares to 5.48 crore shares (worth Rs 1489.62 crore). The company aims to raise Rs 2,614 crore through the public issue at the upper band of the IPO.
The primary capital raised is used to fund business operations and expansion, while the OFS typically allows existing investors to sell shares and realise profits.
Go Digit's IPO is unique as the firm has also had to cut its valuation. Digit was valued at $3.58 billion (2022-23) in the last private round while the issue price values the company at slightly less than $3 billion.
On reduced issue price, the chairman said the requirement for capital went down as it had raised non-convertible debentures worth Rs 200 crore in December last year.
"When we looked at the valuation, we spoke to many investors and took feedback. We wanted to IPO in 2022 and it did not work out. Based on those learnings, we understood that from our perspective, we should leave significant value for the investors coming in now. So that was the philosophy, " Goyal said.
The promoters of Go Digital General Insurance Ltd are Kamesh Goyal, Go-Digit Infoworks Services Private Ltd, Oben Ventures LLP, and FAL Corporation.
Regarding share price, Goyal said that the focus is on business growth instead of share price. "There is too much focus today on what price a company is going for an IPO instead of the business. I don’t look at share price everyday. I don’t know if it is healthy to focus on share prices in the short run, " he said.
Go Digit's Financials
The Company's AUM increased from Rs 9,393.87 crore in FY22 to Rs 12,668.36 crore in FY23, an increase of 34.9%, primarily due to an increase in Gross Written Premium (GWP) and additional capital infusion from share issuances, as per the DRHP document.
For the nine months ended December 31, 2023, AUM stood at Rs 14,909 crore. The Gross Direct Premium Income (GDPI) rose from Rs 4,673.94 crore in the FY22 to Rs 6,160 crore in FY23, an increase of 31.8%.
About Go Digit
The Company offers motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance, and other insurance products, according to the needs of the customers. For the nine months ended December 31, 2023 motor insurance contributed 61.1% of the GWP.
Key Segments
Talking about competition in the Motor vehicle insurance segment, Goyal said that while it is a tough market, experienced players like Digit have an edge. "The motor insurance business is tough but if you look at last four years, we were able to increase our market share. It went up to 6% as of December...Smaller companies offering lower prices may be great in the short-term but will not be able to continue this in the long-run, " He said.
Go Digit IPO
Founded in 2017 by insurance veteran Goyal, Go Digit has fixed the price band at Rs 258-272 per equity share for its initial public offer. The Initial Public Offering of the Company will open on Wednesday, May 15 for subscription and close on Friday, May 17.
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