Why did SEBI suspends the GoDigit IPO

Nearly one month after Go Digit General Insurance Ltd had filed the draft red herring prospectus (DRHP) with SEBI for its proposed IPO, the regulator has decided to keep the IPO in abeyance. Typically, the process is that when a company files the DRHP, the regulator gets back to them withing 1-2 months. Either, the regulator asks for changes to be made to the DRHP or it asks for more details and clarifications. However, if SEBI does not have any objections, it issues its observations, which is equivalent to DRHP approval.

However, in the case of Go Digit General Insurance, SEBI has specifically mentioned on the website that the IPO observations have been kept in abeyance. While there is no explanation provided for the same, in the past SEBI has kept issues in abeyance when there has been probably a cause for investigation either into the company in question or into a group company. Go Digit is an InsureTech company that originates and offers motor, health, travel, property, marine, liability and other insurance products on its cloud based platform.

For the uninitiated, Go Digit General Insurance Ltd has a marquee ownership pattern. India’s superstar couple; Virat Kohli and Anushka Sharma are investors in the company. In addition, even the noted Canadian investor, Prem Watsa of Fairfax Group, has an ownership stake in Go Digit General Insurance Ltd. The only thing that the SEBI website says at this point is that the issue of observations has been kept in abeyance. It is not known if the company has got any communication as Go Digit has not spoken to the media on this subject.

In the middle of August 2022, Go Digit General Insurance Ltd had filed its papers with SEBI for approval. The total size of the issue is not known as that would depend on the pricing of the IPO. However, what we know as of now from the DRHP is that the issue would be a mix of fresh issue and an offer for sale by the early shareholders and promoters. While the fresh issue size is Rs1,250 crore, the offer for sale (OFS) is for a total of 10.94 crore shares. The fresh issue proceeds will be used to fund growth and capitalize the balance sheet.

The company has shown steady and impressive growth in top line and bottom line numbers over the years. Its customer base increased from 14.27 million in FY21 to 25.77 million in FY22. In FY22 alone, Go Digit General Insurance Ltd sold close to 7.76 million policies, a sharp growth compared to the previous fiscal year. For FY22, revenues grew 70% to Rs3,841 crore while the AUM grew 68% to Rs9,398 crore. Net losses for the full year FY22 more than doubled yoy to Rs296 crore. The losses are more due to front-loading of expenditure.

The IPO of Go Digit General Insurance Ltd  is being lead managed by big names like ICICI Securities, Morgan Stanley India, Axis Capital, Edelweiss Financial, HDFC Bank and IIFL Securities. Just last month, HDFC Bank had bought 9.94% stake in Go Digit General Insurance Ltd  and Axis Bank is also looking at taking a stake in the company. Go Digit General Insurance is founded and led by Kamlesh Goyal, the former CEO of Bajaj Allianz and who has also spent a long time working at the Alliance AG office at Munich in Germany.

Go Digit General Insurance Ltd  is not the first company to get an “Abeyance” note from SEBI. Earlier, a similar observation was made by Sebi last month on the approval process of Biba Fashions, which is backed by Warburg Pincus and Faering Capital. We need to await further details on the Go Digit General Insurance Ltd abeyance opinion.