According to three people familiar with the subject, India’s Digit Insurance, which is backed by Canadian billionaire Prem Watsa’s Fairfax Group, is considering raising $500 million in an initial public offering at a valuation of $4.5 billion to $5 billion. Founded in 2017, Digit is attempting to capitalise on India’s underserved general insurance industry, as well as users’ desire for a better customer experience, such as faster claim settlements, despite the country’s recent IPO failures.
The deal’s bookrunners are Morgan Stanley and ICICI Securities, both of which are based in India. According to the persons, it aims to present its drafting documents with the markets regulator by September and list by January. They wished to remain anonymous since they were not authorised to speak to the media.
Digit’s representative declined to comment on “speculation.” Morgan did not respond to emails requesting comment, and ICICI declined to comment as well.
When Digit raised a round of funding earlier this month, it was valued at about $4 billion. In addition to Fairfax, it has raised more than $400 million from Sequoia Capital, A91 Partners, and Faering Capital.
India’s largest initial public offering, state-owned Life Insurance Corp, fell 7.8% on its first day after raising $2.7 billion, significantly less than the $12 billion target. Paytm, a fintech company, saw its stock plummet after its $2 billion IPO last November.
Following a boom in 2021, Indian companies have found it challenging to raise funds privately this year.
Before going public, India’s insurance regulator requires companies to be at least five years old, which Digit will be by September. According to sources, Digit wants to raise money by issuing new shares while Fairfax, the company’s largest stakeholder with a 30% position, reduces its holdings.
Kamesh Goyal, the company’s creator, is an experienced insurance executive who formerly led Allianz’s Indian joint venture. Virat Kohli, the Indian cricketer, is an investor and brand ambassador for the company.
According to the Insurance Regulatory and Development Authority of India, non-life insurance penetration in India was only 0.94 percent in 2020/21, down from 0.56 percent around 20 years ago.
Its revenue increased by 62 percent to $675 million in the previous fiscal year, exceeding the industry’s gain of 11 percent. In 2020/21, the company lost $7.8 million on $309 million in revenue, but its most recent profit or loss could not be determined promptly.
One of the persons claimed Digit is one of India’s few startup unicorns – companies valued at more than $1 billion that are profitable or close to profitability.
Demand for Digit’s IPO, according to bankers, will be determined by how the company prices its shares, as well as macroeconomic conditions. Fears of inflation and increasing interest rates are impacting IPO demand in India and elsewhere.
“Digit is growing fast, so by the time they start talking to IPO investors, the $4 billion valuation will seem outdated,” one banker said. “Given they don’t burn cash, it is an attractive proposition for institutional investors.”