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Go Digit Insurance Ltd - IPO Review

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14 May 20246 mins readBy MOFSL

Go Digit's Upcoming IPO:Insuretech Unicorn's Public Offering

The Indian insurance landscape is on the brink of a significant transformation as Go Digit General Insurance Limited, a prominent insuretech unicorn, prepares for its highly anticipated Initial Public Offering (IPO). The highly anticipated IPO is going live from May 15th and will be available for subscription until May 17th. So, let’s dig deep and find some information that might be critical for you to decide whether to apply for this IPO or not?

IPO Open Date May 15, 2024
IPO Closing Date  May 17, 2024
Face Value ₹10 per share
Price Band ₹258 to ₹272 per share
Lot Size 55 Shares
Min Investment  ₹ 14,190
Total Issue Size 96,126,686 shares
(aggregating up to ₹2,614.65 Cr)
Fresh Issue 41,360,294 shares
(aggregating up to ₹1,125.00 Cr)
Offer for Sale 54,766,392 shares of ₹10
(aggregating up to ₹1,489.65 Cr)

Go Digit's Journey: From Inception to Unicorn Status

Established in 2016, the insurtech company attained its unicorn status in Feb 2021, becoming the first insurance start-up in India to get a unicorn status. Starting slow, founder Kamesh Goyal, quickly realized the pain that individuals go through while getting insurance and also claiming it. Thus the idea to reduce documentation and digitizing  processes came into his mind and the business was born.  During the pandemic, when motor insurance demand plummeted, Digit rolled out COVID-19 related products, including the country’s first COVID-19 insurance. The company's focus on simplicity has earned it over seven million customers and a Net Promoter Score of over 90, the highest in the industry. With time, Go Digit has seen traction in health-related insurance, with non-motor products gaining prominence.

 

A Robust Network and Technological Prowess

As of December 31, 2023, Go Digit boasted an extensive network of 61,972 partners, including 58,532 Point of Sales Persons (POSPs) and other agents. The company's commitment to leveraging cutting-edge technology is evident in its deployment of 473 active bots to automate tasks for functions and partners. This technological prowess has enabled Go Digit to streamline processes, introduce paperless solutions, and foster an agile, customer-centric approach.

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Capturing Market Share and Simplifying Insurance

Go Digit's strategic focus on simplifying insurance documentation has yielded remarkable results. Research indicates that the company's policies are readable even for 15-year-olds, ensuring accessibility and clarity for policyholders. This customer-centric approach has contributed to Go Digit capturing a significant 82.1% market share of Gross Written Premiums (GWPs) in the Financial Year 2023.

 

The IPO Specifics: An Overview

Go Digit's IPO comprises a fresh issue of shares worth ₹1,125 crore and an Offer for Sale (OFS) component of 54,766,392 shares. The price band for the public issue is set at ₹258 to ₹272 per share, with the company aiming to raise ₹2,614.65 crore at the upper end of the price band.

The IPO will open for subscription on May 15, 2024, and close on May 17, 2024. The allotment of shares is expected to be finalized on May 21, 2024, with the tentative listing date set for May 23, 2024, on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

The Go Digit IPO allocation reserves 75% of the shares for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and the remaining 10% for Retail Individual Investors (RIIs). Investors can bid for a minimum of 55 equity shares, with increments of 55 shares thereafter.

The minimum investment threshold for RIIs is ₹14,960, while for NIIs (High Net Worth Individuals), it is ₹209,440 for 14 lots (770 shares) and ₹1,002,320 for 67 lots (3,685 shares) for Qualified Institutional Buyers (QIBs).

 

Prominent Backers and Investors

Go Digit has garnered support from prominent investors, including cricketer Virat Kohli and actress Anushka Sharma, who are company shareholders. Additionally, marquee investors such as Fairfax and Peak XV have backed the insuretech unicorn.

Kohli and Sharma, who invested ₹2 crore and ₹50 lakh, respectively, in 2020 through a private placement, are poised to reap substantial returns from their investments. At the upper price band of ₹272, the couple's combined investment of ₹2.5 crore could potentially yield a multibagger return of 263%, translating to a profit of ₹6.56 crore.

 

Utilization of IPO Proceeds

Go Digit plans to allocate the net proceeds from the IPO towards maintaining its solvency ratio, a crucial financial metric for insurance companies. As of December 31, 2023, the company's solvency ratio stood at 160%, and with the capital infusion from the IPO, Go Digit aims to surpass the 200% solvency ratio mark by May 31, 2024.

 

Financial Performance and Growth Trajectory

Go Digit General Insurance Limited's financial performance has been impressive, with revenue increasing by 113.35% and profit after tax (PAT) rising by 112.01% between the financial years ending March 31, 2023, and March 31, 2022. As of December 31, 2023, the company reported profit after tax of ₹129 crore.

 

Industry Outlook and Growth Potential

The Indian non-life insurance sector presents substantial growth opportunities, with a penetration rate of only 1.0% in the Financial Year 2023, far below the global average of 4.0%. Additionally, the non-life insurance density in India stood at a mere US$ 23.00 per capita in the same fiscal year, highlighting the untapped market potential.

 

Strengths and Competitive Advantages

Go Digit's strengths lie in its ability to offer customizable products, achieving high net promoter scores of 73.3% for non-claims and 93.1% for motor claims. The company tailors customer journeys, provides access to tools, training, and self-service options, enabling efficient management of over 600 POSPs per relationship manager.

Moreover, Go Digit leverages extensive data and artificial intelligence to accurately assess risk, automate underwriting, and identify profitable business opportunities, enhancing strategic decision-making capabilities.

 

Risks and Challenges

While Go Digit has demonstrated remarkable growth, it is essential to consider the potential risks and challenges that the company may face. These include profitability challenges due to historical losses, volatile operating results with fluctuating profit/loss figures, inadequate loss reserves estimation, and exposure to catastrophic events such as natural disasters and terrorism.

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Investors' Perspective and Market Sentiment

The Go Digit IPO has garnered significant attention from investors, with the shares commanding a premium of ₹50 in the grey market. This premium, also known as the 'grey market premium,' indicates investors' willingness to pay more than the issue price, reflecting their confidence in the company's prospects.

 

Conclusion: A Promising Opportunity in the Evolving Insurance Landscape

Go Digit General Insurance Limited's IPO presents a promising opportunity for investors to participate in the growth of the Indian insurance sector. With its innovative approach, technological prowess, and commitment to customer-centricity, Go Digit has positioned itself as a disruptive force in the industry. However, as with any investment decision, it is crucial for investors to conduct thorough due diligence, assess the risks, and align their investment strategies with their financial goals and risk appetite.

 

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Disclaimer: The stocks, companies, or financial instruments mentioned in this blog are for informational purposes only and should not be considered as investment recommendations. It is advised to consult with your financial advisor before making any investment decisions. Investment in securities markets are subject to market risks, read all the related documents carefully before investing. Investors are strongly encouraged to carefully read the risk disclosure documents prior to participating in market-related investments or trading activities. Due to the volatile nature of financial markets, no guarantees can be made regarding investment returns. Motilal Oswal Financial Services Ltd. does not offer any assured returns on market-linked securities. Please note that past performance of stocks or indices is not indicative of future results.
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