HDFC Bank to acquire 9.95% stake in Go Digit Life Insurance; stock up

Banking major HDFC Bank Ltd. will invest up to ₹69.9 crore in Go Digit-Life Insurance Ltd. for about a 9.95% stake. Go Digit or Digit Insurance is a Bengaluru-based general insurance company that offers motor insurance, health insurance, travel insurance, property insurance, marine insurance, and liability insurance.

The private lender, in an exchange filing today, said HDFC Bank has entered into an "indicative and non-binding term sheet" with Go Digit Life Insurance Ltd. This summarises the principal terms of a proposed investment worth ₹49.9 crore to ₹69.9 crore by HDFC Bank in two tranches by subscribing Go Digit equity shares for an equity stake of up to 9.944%.

The bank has said that the company proposes to carry out life insurance business in India, subject to the grant of a certificate of registration by the Insurance Regulatory and Development Authority of India (IRDAI).

HDFC Bank distributes life, general and health insurance and mutual funds (third party) products. The bank’s income from this business grew by 24% to ₹4,422 crore from ₹3,573 crore in FY22. In life insurance, HDFC Bank has adopted open architecture for insurance distribution with eight insurers and the premium mobilisation for FY22 was ₹6,819 crore. In non-life insurance, HDFC Bank’s premium mobilisation was ₹2,270 crore in FY22.

In line with the sector, the private bank share opened higher at ₹1,471.6 and rose to the intra-day high of ₹1,480.35 on the NSE. The stock is trading higher than 20-day, 50-day, 100-day and 200-day moving averages but lower than 5-day moving averages.

The banking sector has also opened in the green and is up 0.94% currently, while the benchmark Sensex has opened 0.70% higher.

Go Digit, which started its journey in October 2017, became a unicorn in 2021 and is valued at $3.5 billion. Go Digit is backed by Canadian businessman Prem Watsa-owned Fairfax and Kamesh Goya, one of the largest insurance companies in the world. The promoters of Go Digit Infoworks Services are Kamesh Goyal, Oben Ventures LLP (formerly Oben Ventures) and FAL Corporation.

Digit Insurance in its last funding round in July 2022 had raised $200 million from its existing investor Faering Capital and new investors like Sequoia Capital India, IIFL Alternate Asset Managers and a few others, subject to IRDAI approval. The investment would bring the total capital infused into Digit Insurance to $442 million.

On August 17, 2022, Go Digit filed a Draft Red Herring Prospectus (DRHP) with the market regulator SEBI for an initial public offering (IPO). The IPO comprises a fresh issue of shares worth ₹1,250 crore and an offer for the sale of 10.9 crore shares by its promoter and selling shareholders. The company incurred a loss after tax of ₹295.8 crore in fiscal 2022, ₹122.7 crore in fiscal 2021 and ₹175.2 crore in fiscal 2020.