Go Digit General Insurance Ltd has received regulatory approval to float an initial public offering, more than a year after it first filed draft documents for the share sale.
The Securities and Exchange Board of India issued its observations to Digit Insurance’s IPO proposal on March 1, according to the capital markets regulator’s website. SEBI’s observations to IPO proposals are akin to its approval, which is valid for one year.
Digit filed its draft red herring prospectus for an IPO in August 2022. However, its plans were delayed after SEBI kept the IPO proposal in abeyance and raised concerns over the legality of some share issuances. The company refiled the documents in March 2023 after addressing the issues.
Digit counts Indian-born Canadian billionaire Prem Watsa's Fairfax as its main investor. The company’s other investors are venture capital firms A91 Partners and Peak XV Partners as well as private equity firms Faering Capital and TVS Capital.
According to the draft papers filed last year, the company planned to raise Rs 1,250 crore ($151 million) through an issue of new shares. The IPO also included an offer for the sale of 109.4 million shares. The total IPO size was estimated at $440 million.
Digit's share-sale plans come at a time when India's stock markets are trading at record highs and the IPO market has boomed. The company was valued at $3.5 billion when it last raised funding in mid-2021. However, it came under a cloud earlier this year when US short seller Muddy Waters accused Fairfax of “abusive accounting”.
“We feel it is incontrovertible that Digit is worth far less today than where Fairfax ultimately marked it in 2021, which is why we adjust Fairfax's book value down by $1.1 billion, as of December 2022, for Digit,” it said.
Muddy Waters said that if Digit were to list on the Indian stock exchanges going forward, it would probably be at a valuation lower than $3.5 billion.
“Digit was able to take advantage of Silicon Valley's lack of discipline in 2021 (Sequoia invested at a $3.5 billion valuation). Unfortunately for Digit, due to the Indian regulatory process, it was unable to list while the market was still hot. This will likely lead to a down round IPO,” it said.
