According to three people familiar with the situation, 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. Kamesh Goyal, the founder of Digit, is an insurance industry veteran who previously worked for Germany’s Allianz and led its Indian joint venture. Indian cricketer Virat Kohli is an investor and brand ambassador for the company.
Founded in 2017, Digit is attempting to capitalize on India’s underserved general insurance market as well as users’ desire for a better customer experience such as easier claim settlements, despite the fact that IPOs in the country have performed poorly in recent months.
Morgan Stanley and Indian investment bank ICICI Securities have been appointed as book-runners for the transaction by Digit. According to the people, who requested anonymity because they were not authorized to speak to the media, it plans to file its draft documents with the markets regulator by September and list by January.
Digit’s spokesperson declined to comment on “speculation.” ICICI also declined to comment, and Morgan did not respond to requests for comment.
When Digit raised a round of funding earlier this month, it was valued at nearly $4 billion. In addition to Fairfax, it has received over $400 million in funding from Sequoia Capital, A91 Partners, and Faering Capital.
The state-owned Life Insurance Corp’s initial public offering dropped 7.8 percent on its debut this month after raising $2.7 billion, far less than its original plan of $12 billion. Paytm, a fintech firm, also plunged on its debut last November after a $2 billion IPO.
Following a boom in 2021, Indian start-ups have also found it difficult to raise private capital this year.
Before going public, India’s insurance regulator requires companies in the sector to be at least five years old, which Digit will be by September. According to the sources, Digit intends to raise funds by issuing new shares while Fairfax, its largest shareholder with approximately 30%, reduces its stake.
Fairfax could not be reached immediately.
According to data from the Insurance Regulatory and Development Authority of India, non-life insurance penetration in India stood at 0.94 percent in 2020/21, up from 0.56 percent about 20 years ago.
According to its website, Digit has served more than 20 million customers in car, bike, health, and travel insurance.
Its revenue increased by 62 percent to approximately $675 million in the previous fiscal year, outpacing the industry’s 11 percent increase. In 2020/21, the company reported a net loss of $7.8 million on revenue of $309 million, but its most recent profit or loss could not be determined.
According to one of the sources, Digit is one of India’s few startup unicorns – companies valued at more than $1 billion – that is profitable or close to profitability.
According to bankers, demand for Digit’s IPO will be determined by how the company prices its shares, as well as macroeconomic factors. Fears of inflation and rising interest rates are dampening IPO demand in India and abroad.
“Digit is growing quickly, so the $4 billion valuation will seem outdated by the time they start talking to IPO investors,” one banker predicted. “It’s an appealing proposition for institutional investors because they don’t burn cash.”
