SEBI puts Go Digit IPO in ‘abeyance’

Market regulator SEBI has kept the IPO (initial public offering) of cricketor Virat Kohli-backed Go Digit General Insurance in 'abeyance'. Bengaluru-based Digit Insurance, which had filed for a draft paper with SEBI (Securities and Exchange Board of India) in August, aims to raise funds via a fresh issue and an offer for sale (OFS).

SEBI has not clearly mentioned the reason behind putting the IPO in 'abeyance'. A notification on its website says the “issuance of observations (has been) kept in abeyance”. The 'abeyance' status, however, does not mean the IPO has been rejected, while the regulator may require additional information from the company. As per rules, SEBI can keep its observations on IPO papers in 'abeyance' for a specific period of 30 days or 45 days or 90 days, or more.

Digit Insurance is a digital full stack insurance company backed by Kohli and Canadian billionaire Prem Watsa. The draft red herring prospectus (DRHP) submitted by the insurer to SEBI on August 17, 2022, showed 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 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. The aim of launching the IPO is to use the proceeds to augment its capital base to meet future capital requirements and maintain solvency levels, the company says.

The funds will be deployed in the current fiscal (FY23). 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.

On August 26, 2022, banking major HDFC Bank had also announced to invest up to ₹69.9 crore in Go Digit for about a 9.95% stake.

Go Digit, which started its journey in October 2017, became a unicorn in 2021 and is valued at $3.5 billion. The promoters of Go Digit Infoworks Services are Kamesh Goyal, Oben Ventures LLP (formerly Oben Ventures) and FAL Corporation.

In its last funding round in July 2022, Digit Insurance 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. This brings the total capital infused into Digit Insurance to $442 million.

The company had 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.