Go Digit General Insurance Limited DRHP

Go Digit General Insurance  Limited has filed  its DRHP with market regulator SEBI on April 6, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue and Offer for Sale both.  The size of IPO is Up to [●] Equity Shares aggregating up to ₹ 1250 crore and the size of Offer for Sale is Up to 109,445,561 Equity Shares aggregating up to ₹[●] crore. As part of OFS, the major selling shareholder is Go Digit Infoworks Services 

Private Limited who will affload Up to 109,434,783 Equity Shares. 

Business Model of the Company

The Company aims to make insurance simple. Through innovation and transparency, it delivers  a seamless customer experience journey in a significant financial product an individual would purchase in their lifetime.

The Company is one of the leading digital full stack insurance companies, leveraging its technology to power an innovative approach for product design, distribution and customer experience for non-life insurance products. Full-Stack Insurers are insurance firms that are fully licensed and controlled by a regulatory authority and perform sourcing, underwriting and servicing all in-house.

Digital full stack insurers are insurance manufacturing companies that focus on integrating technology in their operations. The Company offers motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance and other insurance products, which the customers can customize to meet his or her needs

Management of the Company

(i) Kamesh Goyal is the Non-Executive Chairman of the Company and has been a Director of the Company since its incorporation. He holds a bachelor’s degree in Science from University of Delhi. He holds a bachelor’s degree in law and master’s degree in business administration from University of Delhi. He has several years of experience in the insurance industry and has served as the Chief Executive Officer of Bajaj Allianz General Insurance and Bajaj Allianz Life Insurance 

Company Limited. He is also an Associate of the Insurance Institute of India. 

(ii) Jasleen Kohli, Jasleen Kohli is the Managing Director and Chief Executive Officer of the Company. She has attended K J Somaiya Institute of Management Studies and Research for a post graduate programme in management studies. She has several years of experience in the insurance industry and has served as the–head – operations of Bajaj Allianz General Insurance.

Object of the Issue

Offer for Sale

The Company will not receive any proceeds from the Offer for Sale by the Promoter Selling Shareholder and the proceeds received from the Offer for Sale will not form part of the Net Proceeds. The Promoter Selling Shareholder will be entitled to the proceeds of the Offer for Sale after deducting his proportion of Issue expenses and relevant taxes thereon.

Fresh Issue

The net proceeds of the Fresh Issue of the Company  are proposed to be utilized in the following manner:

(i) To  undertake its existing business activities

(ii) to undertake the activities proposed to be funded from the Net Proceeds. 

Further, the Company expects to receive the benefits of listing the Equity Shares on the Stock Exchanges, which will result in enhancement of  visibility and  brand image among its existing and potential customers.

Risks in the IPO

Track Record of Losses 

The Company has a track record of reporting losses and, although it recorded a profit for the nine months period ended December 31, 2022, it may not be able to maintain profitability in the future. The limited operating history makes it difficult to accurately evaluate the future business prospects.

Regulatory Requirements 

If the Company does not meet certain mandatory ratio requirements required by IRDAI, it could be subject to regulatory actions and could be forced to stop transacting any new business or change the business strategy or slow down the growth.

The Company has been subjected to regulatory inspections by IRDAI

In the past, the Company has been subjected to regulatory inspections by IRDAI that have resulted in cautions, warnings, or penalties for non-compliance with various regulatory prescriptions, including the Insurance Act. For example, IRDAI conducted an onsite inspection of the Company from November 26 to December 7, 2018 and has issued a report pursuant to the inspection containing various observations from its inspection, including purported non-compliance with certain regulations, including those related to pricing, solvency, valuation and risk management, policy servicing, claims and reinsurance.

The Company relies on motor vehicle insurance products

The Company relies on motor vehicle insurance products for a substantial amount of its revenues and profitability. Any constraint on sale of these products due to future changes in regulation or customer preference, or any inability to maintain a profitable portfolio mix of products, could have a material adverse effect on  business, financial condition, results of operations and prospects.

Exposed to Significant Market Risks 

The Company is exposed to significant market risk, including changes in interest rates or adverse movements in the equity markets in India that could impair the value of the investment portfolio and have a material adverse effect on the business, financial condition and results of operations, and this risk is exacerbated by restrictions on, and concentration in, the investment portfolio as a result of regulations about types and levels of investment that are applicable to the Company.

Financial Performance

As per the financial statements of the Company:

The Company  experienced a decline in losses before tax  in FY22. The profit before tax loss for FY22 was Rs. (295.85) crore, while in FY21, it was Rs. (122.76) crore. This represents a decrease of approximately 141.7%.

The after-tax figures for FY22 mirrored the pre-tax trend. The after-tax loss for FY22 was also Rs. (295.85) crore, while in FY21, it was Rs. (122.76) crore. This indicates a decrease of approximately 141.7%.

The  earnings per share (EPS) declined in FY22. The EPS for FY22 was Rs. (3.55), while in FY21, it was Rs. (1.50). This represents a decrease of approximately 136.7%.

Go Digit General Insurance Limited generated cash of Rs. 2,470.71 crore from operating activities in FY22, compared to Rs. 1,563.37 crore in FY21. This indicates an increase of approximately 58.0%.

The company used cash of Rs. (3487) crore for investing activities in FY22, while in FY21, it used Rs. (1637) crore. This shows an increase of approximately 113.1%.

The Company generated cash of Rs. 1,003.12 crore from financial activities in FY22, compared to Rs. 158.88 crore in FY21. This represents a significant increase of approximately 531.6%.

Summarizing the financial performance of Go Digit General Insurance Limited for FY22, we note a challenging year with significant losses, lower earnings per share, and increased cash utilization for investing activities. However, there was growth in cash flow from operating activities and an improvement in cash flow from financial activities.