Go Digit will be the 30th mainboard IPO this year and is attracting attention for listing gains

The Go Digit IPO is live, where the company is offering its shares. The IPO aims to raise a total amount of ₹2,614.65 crore which is divided into two parts: a fresh issue of 4.14 crore shares (value: ₹1,125 crore) and an offer for sale of 5.48 crore shares (value: ₹1,489.65 crore.)

IPO Details

Go Digit Insurance IPO will close on May 17. Minimum lot size is 55 shares with a price band of ₹258 to ₹272 per share. The minimum investment for retail investors is ₹14,960. The allotment of shares is expected by May 21, 2024, and the listing is scheduled for May 23, 2024.

The listing of Go Digit will be the 30th mainboard IPO this year and is attracting attention for listing gains in the current volatile market. Aadhar Housing Finance, which debuted on May 15th, 2024, had almost a flat listing debut of 4.6%. Let’s compare Go Digit with its peers on a relative valuation basis and what can be expected by the company in the long term.

Company Overview

They are one of the leading digital full-stack insurance companies, leveraging their technology to power what they believe to be an innovative approach to product design, distribution, and customer experience for non-life insurance products. Digital full-stack insurance companies are licensed insurance operators or companies that have end-to-end digital capabilities and a digital-first approach across customers’ insurance value chain.

Product Segment

The company offers insurance for motor, health, travel, property, marine, liability and others. Motor, engineering, and property insurance contribute 61.1%, 14.9% and 11.4%, respectively.

Market Positioning

The company gained a significant market share due to its digital presence and aggressive pricing. In the motor insurance segment, the company emerged as the fourth-largest private player as of the nine months ending December 2023, with a market share of 6%.

In FY23, the company reported a net profit of ₹35.5 crore, before that company was loss-making. The ROE was in single digits in FY23 at 1.5%. As the Indian Insurance Industry is untapped and heavily regulated, the space is competitive.

Go Digit directly competes with government and private companies in the industry which forces them to aggressively price their products, which leads to margin contraction. Their expense ratio expanded from 38.9% for the nine months ended December 31, 2022, to 39.1% for the nine months ended December 31, 2023, which is the highest among its listed competitors.

Valuation

Current IPO Status

Go Digit IPO subscribed 9.5 times. The public issue subscribed 4.2 times in the retail category, 12.5 times in QIB, and 7.2 times in the NII category by May 17, 2024 (Day 3).

Despite a low current ROE and high valuation metrics, Go Digit has shown strong premium growth and financial independence, supported by its IPO proceeds and absence of contingent liabilities, ensuring sustainable operations.