India’s Digit Insurance, backed by Canadian billionaire Prem Watson’s Fairfax Group, is considering raising $ 500 million to $ 5 billion in initial public offering, the trio told Reuters.
Founded in 2017, Digit has been trying to capitalize on India’s less-penetrated general insurance market with the need for a better customer experience, such as easy claims settlement, although IPOs have not performed well in the country in the past few months.
Digit Morgan Stanley and Indian Investment Bank have appointed ICICI Securities as bookrunners for the deal. It said it plans to submit its draft documents to the market regulator by September and list it by January, saying people who want anonymity are not authorized to speak to the media.
A spokesman for Digit declined to comment on “speculation.” ICICI also declined to comment but Morgan did not respond to emails seeking comment.
Digit was worth about $ 4 billion earlier this month when it raised a portion of the fund. It has so far raised more than $ 400 million from Fairfax, along with Sequoia Capital, A91 Partners and Fairing Capital.
India’s largest public offering – the state-owned Life Insurance Corporation – fell 7.8% after raising $ 2.7 billion this month, down from its original plan of $ 12 billion. Fintech firm Paytm also sank in its debut after a $ 2 billion IPO last November.
After the boom in 2021, Indian start-ups have struggled to raise money privately this year.
India’s insurance regulator must be at least five years old before going public with companies in the sector, which will be supplied by Digit by September. Digit plans to raise money by issuing new shares with Fairfax, which is a large shareholder of about 30%, trimming its stake, people said.
Fairfax could not be immediately contacted.
Digit founder Kamesh Goyal is an insurance industry veteran who has worked with Allianz in Germany and head of its Indian joint venture. Indian cricket star Virat Kohli is an investor and its brand ambassador.
Non-life insurance penetration in India is only 0.94% in 2020/21, up from 0.56% almost 20 years ago, data from the Indian Insurance Regulatory and Development Authority.
Digit has served more than 20 million customers across car, bike, health and travel insurance, according to its website.
Its revenues rose 62% to $ 675 million in the last fiscal year, surpassing the industry’s 11% increase. The company recorded a net loss of $ 7.8 million on revenues of $ 309 million in 2020/21, but its recent gains or losses could not be immediately determined.
Digit is one of the few early unicorns in India – a term for companies valued at more than $ 1 billion – said one of the people who said it was profitable or close to profitable.
Bankers say the demand for Digit’s IPO depends on macroeconomic factors and how its shares are valued. Fears of inflation 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 value seems old,” said one banker. “They don’t burn money. It’s an attractive proposition for institutional investors.”