Evaluating Go Digit General Insurance Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Go Digit General Insurance Ltd and present you with the exclusive IPO details.

About the Issue  

Go Digit General Insurance Ltd is launching its initial public offering (IPO) for equity shares valued at Rs 10 each. The IPO price range is set between Rs 258 and Rs 272 per equity share, resulting in a total issue size of Rs 2,614.65 crore at the upper price band.  

The IPO is scheduled to commence on May 15, 2024, and will conclude on May 17, 2024. The market lot size for the IPO is 55 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 715 shares or a total investment of Rs 1,94,480 assuming the upper price band.   

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. To undertake its existing business activities

2. To undertake the activities proposed to be funded from the net proceeds.

Further, the company expects to receive the benefits of listing the equity shares on the stock exchanges, which, the company believes, will enhance the visibility and its brand image among its existing and potential customers.

Promoter holding  

Kamesh Goyal, Go Digit Infoworks Services Private Limited, Oben Ventures LLP And FAL Corporation are the promoters of the company. The promoters currently hold a pre-issue shareholding stake of 83.30 per cent in the company.

Company profile  

Go Digit General Insurance Ltd is a digital full-stack non-life insurance provider, that utilises advanced technology to pioneer innovative approaches in product design, distribution, and customer experience for non-life insurance products. It offers a range of customizable insurance products, including motor, health, travel, property, marine, and liability insurance, tailored to meet customers' specific needs.

The company introduced 74 active products across all its business lines. As of the nine months ended December 31, 2023, and the financial year 2023, the company achieved a market share of approximately 6.0 per cent and 5.4 per cent, respectively, in the motor insurance segment. As of December 31, 2023, the company had distribution centres in 24 states and union territories across India. The company deploys a combination of insurance and technology solutions to assist with enrolment, insurance claims processing, underwriting, policy administration, data insights, and fraud detection.

Financials  

The company reported losses for FY21, and the losses for FY22 worsened further. However, it managed to achieve satisfactory performance in FY23, with modest revenue and profit figures. The figures for the first nine months of FY24 were comparatively impressive, indicating significant growth potential for FY24 if the current pace is maintained. However, concerns about sustained growth persist.

Valuation and outlook  

The issue is priced with a P/BV ratio of 9.67 times, calculated using its Net Asset Value (NAV) of Rs 28.12 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 138.

The valuation of Go Digit General Insurance Ltd IPO is exceedingly high, making it significantly more expensive than its listed peers. Additionally, other listed stocks are available at lower valuations and are providing higher returns.

The company started insurance operations in 2017, and given its limited history, predicting future operating results may be challenging, and past performance may not be comparable to future outcomes. Therefore, we advise investors to avoid this expensive bet due to its associated risks.