Go Digit General Insurance makes a lacklustre debut: What should investors do next?

Go Digit General Insurance Ltd made a lacklustre debut on the stock exchanges on Thursday, May 23, listing at just around 5% premium.

The muted listing was not a surprise as the ₹2,615-crore IPO had garnered a subscription of only around 9.6 times despite creating a huge buzz in the market.

Shares of Go Digit General Insurance Ltd opened 5.14% higher at ₹286 apiece on the NSE compared to the issue price of ₹272. However, the stock rallied to an intraday high of ₹305.8 apiece, up 12.42% compared to the IPO price.

After the listing, shareholders in Go Digit General Insurance would be weighing in on whether to stay invested in the stock or make a timely exit.

However, before taking any decision the investors should keep a watch on the fundamentals of the company and its strengths as well as weaknesses.

Go Digit General Insurance operations

Go Digit General Insurance is India’s largest digital full stack non-life insurance company. It offers motor, health, travel, property, marine, liability and other insurance products which can be customised by the customer.

The company has seen a consistent increase in revenue and consumer base since its incorporation in 2016 due to the enhanced customer experience it offers through easy-to-understand and customisable products.

Go Digit also operates on an advanced technology platform that allows it to simplify, empower and customise processes; utilise AI and machine learning to enhance efficiency; and leverage data banks to enable algorithm-driven strategic decisions. However, shareholders should take into account the losses posted by the company year after year.

Go Digit strengths and weaknesses to watch out

In FY21, Go Digit reported losses of ₹123 crore, which widened further to ₹296 crore in FY22. In FY23, the company posted a modest profit of ₹36 crore. Though the FY24 earning numbers are still not in, the company said that it was sitting on a net profit of ₹129 crore for the nine-month period ended December 2023.

The company is likely to suffer from too much dependence on motor insurance. Motor insurance accounted for a whopping 61% of its total gross written premium as of 31 December 2023. Hence, any operational hurdle faced by that division may affect the company’s financials significantly.

Another major point of concern is the valuation. Experts believe that Go Digit General Insurance is significantly more expensive than its listed peers like the New India Assurance Company Ltd, Star Health and Allied Insurance Company Ltd and ICICI Lombard General Insurance Company Ltd, thereby limiting return potential.

Given the fact that only limited companies are listed in this space, investors can do thorough research and take their pick accordingly.