Prem Watsa’s Fairfax Group-backed Digit Insurance aiming for $5 billion IPO valuation

Founded in 2017, Digit is attempting to capitalise on India’s underserved general insurance industry, as well as users’ desire for a better customer experience, such as faster claim settlements, despite the country’s recent IPO failures.

India’s Digit Insurance, backed by Canadian billionaire Prem Watsa’s Fairfax Group, is mulling a $500 million IPO at a valuation of $4.5 billion to $5 billion, according to three people familiar with the situation.

Founded in 2017, Digit is attempting to capitalize on India’s underserved general insurance industry, as well as users’ desire for a better customer experience, such as faster claim settlements, despite the country’s recent IPO failures.

The deal’s bookrunners are Morgan Stanley and ICICI Securities, both of which are based in India. The company intends to submit its draught documents to the markets regulator by September and list by January, according to the people, who requested anonymity because they were not authorized to speak to the media.

Digit’s representative declined to comment on “speculation.” Morgan did not respond to emails requesting comment, and ICICI declined to comment as well.

When Digit raised a round of funding earlier this month, it was valued at about $4 billion. In addition to Fairfax, it has raised more than $400 million from Sequoia Capital, A91 Partners, and Faering Capital.

India’s largest initial public offering, state-owned Life Insurance Corp, fell 7.8% on its first day after raising $2.7 billion, significantly less than the $12 billion target. Paytm, a fintech company, saw its stock plummet after its $2 billion IPO last November.

Following a boom in 2021, Indian start-ups have also finding it tough to raise funds privately this year.

Before going public, India’s insurance regulator requires companies to be at least five years old, which Digit will be by September. According to the persons, Digit wants to raise money by issuing new shares while Fairfax, its largest stakeholder with a 30% stake, reduces its holdings.

Fairfax could not be reached right away.

Kamesh Goyal, the company’s creator, is a seasoned insurance executive who formerly led Allianz’s Indian joint venture. Virat Kohli, the Indian cricketer, is an investor and brand advocate for the company.

According to data from the Insurance Regulatory and Development Authority of India, non-life insurance penetration in India was only 0.94 percent in 2020/21, down from 0.56 percent around 20 years ago.

According to Digit’s website, it has serviced more than 20 million consumers with car, bike, health, and travel insurance.

Its revenue increased by 62 percent to $675 million in the previous fiscal year. Exceeding the industry’s gain of 11 percent. In 2020/21, the company lost $7.8 million on $309 million in revenue. But its most recent profit or loss could not be determined promptly.

One of the persons claimed Digit is one of India’s few startup unicorns companies. Thus, valued at more than $1 billion that are profitable or close to profitability.

Demand for Digit’s IPO, according to bankers. Will be determined by how the company prices its shares. As well as macroeconomic conditions. Fears of inflation and increasing interest rates are dampening IPO demand in India and elsewhere.

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

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