Digit Insurance targets $5 billion in IPO valuation: Report

India’s Digit Insurance, backed by Canadian billionaire Prem Watsa’s Fairfax Group, is contemplating elevating about $500 million in an preliminary public providing at a valuation of $4.5 billion to $5 billion, three folks conscious of the matter instructed Reuters.

Founded in 2017, Digit is attempting to capitalise on India’s under-penetrated basic insurance coverage market together with customers’ want for a greater buyer expertise like simpler declare settlements, although IPOs within the nation haven’t performed properly previously few months.

Digit has appointed Morgan Stanley and Indian funding financial institution ICICI Securities as bookrunners for the deal. It plans to file its draft paperwork to the markets regulator by September and record by January, mentioned the folks, who sought anonymity as they weren’t authorised to speak to the media.

A spokesperson for Digit declined to touch upon “speculation”. ICICI too declined to remark whereas Morgan didn’t reply to emails in search of remark.

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

India’s greatest public providing – of state-owned Life Insurance Corp – dropped 7.8% on debut this month after it raised $2.7 billion, far lower than its unique plan of $12 billion. Fintech agency Paytm additionally plunged on its debut final November following a $2 billion IPO.

Indian start-ups even have discovered it tough to lift cash privately this yr after a growth in 2021.

India’s insurance coverage regulator requires corporations within the sector to be a minimum of 5 years previous earlier than going public, which Digit will fulfil by September. Digit plans to lift cash by providing new shares together with Fairfax, its largest shareholder with about 30%, trimming its stake, the folks mentioned.

Fairfax couldn’t instantly be contacted.

Digit founder Kamesh Goyal is a veteran of the insurance coverage trade who labored with Germany’s Allianz and headed its Indian three way partnership. Indian cricket star Virat Kohli is an investor and its model ambassador.

Non-life insurance coverage penetration in India stood at solely 0.94% in 2020/21, from 0.56% about 20 years in the past, information from the Insurance Regulatory and Development Authority of India reveals.

Digit has served greater than 20 million prospects throughout automobile, bike, well being and journey insurance coverage, as per its web site.

Its income surged 62% to about $675 million within the final fiscal yr, outpacing the trade’s 11% improve. The firm recorded a internet lack of $7.8 million on income of $309 million in 2020/21, however its newest revenue or losses couldn’t instantly be ascertained.

Digit is amongst India’s few startup unicorns – a time period for corporations valued at greater than $1 billion – which is worthwhile or near profitability, one of many folks mentioned.

Bankers say that demand for Digit’s IPO will rely upon the way it costs its shares, along with macroeconomic components. Inflation fears and rising rates of interest are weighing on IPO demand in India and overseas.

“Digit is growing fast, so by the time they start talking to IPO investors, the $4 billion valuation will seem outdated,” one banker mentioned. “Given they don’t burn cash, it is an attractive proposition for institutional investors.”