EXCLUSIVE India’s Digit Insurance targets $5 bln in IPO valuation – sources

People stand outside the Bombay Stock Exchange (BSE) in Mumbai, India, September 24, 2021. REUTERS/Francis Mascarenhas/File Photo

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  • Digit considers raising about $500 mln in IPO – sources
  • Plans to file draft documents by Sept, list by Jan – sources
  • Morgan Stanley, ICICI Securities bookrunners – sources

MUMBAI, May 25 (Reuters) – India’s Digit Insurance, backed by Canadian billionaire Prem Watsa’s Fairfax Group, is considering raising about $500 million in an initial public offering at a valuation of $4.5 billion to $5 billion, three people aware of the matter told Reuters .

Founded in 2017, Digit is trying to capitalise on India’s under-penetrated general insurance market along with users’ need for a better customer experience like easier claim settlements, though IPOs in the country have not done well in the past few months. read more

Digit has appointed Morgan Stanley and Indian investment bank ICICI Securities as bookrunners for the deal. It plans to file draft documents to the markets regulator by September and list by January, said the people, who sought its anonymity as they were not authorized to talk to the media.

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A for Digit declined to comment “speculation”. ICICI too declined to comment while Morgan did not respond to emails seeking comments.

Digit was valued at close to $4 billion earlier this month when it raised a tranche of funding. It has so far raised more than $400 million from Sequoia Capital, A91 Partners and Faering Capital, in addition to Fairfax.

India’s biggest public offering – of state-owned Life Insurance Corp (LIFI.NS) – dropped 7.8% on debut this month after it raised $2.7 billion, far less than its original plan of $12 billion. Fintech firm Paytm (PAYT.NS) also plunged on its debut last November following a $2 billion IPO.

Indian start-ups also have found it difficult to raise money privately this year after a boom in 2021. read more

India’s insurance regulator requires companies in the sector to be at least five years old before going public, which Digit will fulfil by September. Digit plans to raise money by offering new shares along with Fairfax, its largest shareholder with about 30%, trimming its stake, the people said.

Fairfax could not immediately be contacted.

Digit founder Kamesh Goyal is a veteran of the insurance industry who worked with Germany’s Allianz and headed its Indian joint venture. Indian cricket star Virat Kohli is an investor and its brand ambassador.

Non-life insurance penetration in India stood at only 0.94% in 2020/21, from 0.56% about 20 years ago, data from the Insurance Regulatory and Development Authority of India shows.

Digit has served more than 20 million customers across car, bike, health and travel insurance, as per its website.

Its revenue surged 62% to about $675 million in the last fiscal year, outpacing the industry’s 11% increase. The company recorded a net loss of $7.8 million on revenue of $309 million in 2020/21, but its latest profit or losses could not immediately be ascertained.

Digit is among India’s few startup unicorns – a term for companies valued at more than $1 billion – which is profitable or close to profitable, one of the people said.

Bankers say that demand for Digit’s IPO will depend on how it prices its shares, in addition to macroeconomic factors. Inflation fears and rising interest rates are weighing on IPO demand in India and abroad.

“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.”

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Reporting by M. Sriram; Editing by Krishna N. Das and Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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