Virat Kohli, Fairfax-backed Digit Insurance files draft papers for IPO

Digit Insurance, a digital full stack insurance company backed by Indian cricketer Virat Kohli and Canadian billionaire Prem Watsa, has filed draft documents with the capital markets regulator for raising funds through the initial public offering (IPO) route.

As per the draft red herring prospectus (DRHP) submitted by the insurer to the Securities and Exchange Board of India (SEBI), the initial issue will comprise of both fresh issue of shares as well offer for sale (OFS) portions. Under the fresh issue portion of its IPO, Digit Insurance will issue an unspecified number of shares aggregating to ₹1,250 crore.

In the OFS portion, the Digit Insurance DRHP says, selling shareholders will offload 109,445,561 equity shares of the company. The document does not divulge the proceeds expected to be raised from the sale of existing stake. These proceeds will be received by the selling shareholders, not the company, and they will not be part of the net IPO proceeds, the DRHP clarifies.

The selling shareholders include Go Digit Infoworks Services Private Limited (109,434,783 shares), Nikita Mihir Vakharia jointly with Mihir Atul Vakharia (4,000 shares), Nikunj Hirendra Shah, jointly with Sohag Hirendra Shah (3,778 shares), and Subramaniam Vasudevan jointly with Shanti Subramaniam (3,000 shares).

Neither Virat Kohli, who is an investor and the brand ambassador of Digit Insurance, nor Prem Watsa’s Fairfax Group will offload any stake in this IPO, the DRHP shows.

Digit Insurance intends to utilise the IPO proceeds to augment its capital base to meet future capital requirements and maintain solvency levels, the company says in its draft documents. The funds from the issue will be deployed in the current fiscal (FY23), it adds. As per the extant regulatory norms maintained by the Insurance Regulatory and Development Authority of India (IRDAI), Digit Insurance is required to maintain a minimum solvency ratio of 1.50x.

“Our proposed deployment of the net proceeds has not been appraised and it is based on management estimates, current circumstances of our business and prevailing market conditions, which may be subject to change. Our management will therefore have broad discretion to use the net proceeds,” says the digital insurer.

In the interim, pending utilisation of the net proceeds for the aforementioned objectives, Digit Insurance says it will temporarily invest them in deposits in one or more scheduled commercial banks allowed by the Reserve Bank of India. The company further adds that it will not use the proceeds for buying, trading or otherwise dealing in shares of any other listed company or for any investment in the equity markets.

Digit Insurance is a digital full stack insurance company that offers non-life insurance products across motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance, and other verticals. The company claims to have served 82.9% of the gross written premiums (GWPs) written by digital full stack insurance players in FY22, amounting to premiums worth ₹5,268 crore, making it the largest player in the space in India, according to a RedSeer report commissioned and paid for by the company.

Digit Insurance’s GWP was ₹5,268 crore, ₹3,243 crore, and ₹2,252 crore in FY22, FY21 and FY20, respectively, representing a CAGR of 52.9% during this period. By comparison, the GWP of the overall non-life insurance market in India grew at a CAGR of 8.3% from Fiscal 2018 to Fiscal 2022, the RedSeer report notes. The asset under management (AUM) with the company increased to ₹9393.87 crore in FY22 from ₹5,590.11 crore in FY21.

For the financial year ended March 2022, Digit Insurance saw its net loss widen to ₹295.86 crore from ₹122.76 crore in the year-ago period.

The company has roped in ICICI Securities, Morgan Stanley, Axis Capital, Edelweiss Financial Services, HDFC Bank and IIFL Securities as the book running lead managers (BRLMs) for the issue. Link Intime is the registrar for the IPO.