Go
Digit General Insurance is a digital full stack non-life insurance company,
leveraging technology for enhancing product design, distribution and customer
experience. The company, incorporated in December 2016, catered approximately
82.5% or Rs 6680 crore (9MFY2024) of the GWPs written by digital full stack
insurance players including Go Digit, Acko and Navi, making it the largest
digital full stack insurance player in India.
Go
Digit offers motor insurance, health insurance, travel insurance, property
insurance, marine insurance, liability insurance, and other insurance products.
The company has designed its underlying business model to minimize dependency
on any single line of business.
The
company has launched 74 active products across all business lines. It has
achieved a significant market share of 6.0% in the motor insurance segment. In
addition, the focus is on product innovations to satisfy real unmet insurance
needs. The company was one of the first insurers to offer group illness
insurance covering Covid-19 hospitalization costs. It has created an
acquisition funnel resulting in multiple opportunities to attract customers. The
company has significantly scaled business, improved underwriting performance
and generated consistent investment returns.
The
company maintains a broad distribution footprint across 24 of the 36 states and
union territories in India. It had relationships with 61,972 key distribution partners,
including 58,532 POSPs, as well as individual agents, corporate agents, brokers
and others. The company also offers products
directly to customers through its website and through web aggregators.
The company is one of the first non-life insurers in India to
be fully operated on cloud. It has developed application programming interface
(API) integrations with several channel partners. The company also utilizes artificial
intelligence and machine learning to increase automated processing of
applications and claims. The use of technologies enables underwriting in an
efficient manner, a differentiator among insurers.
Further
harnessing its technology platform, the company has developed predictive
underwriting models to leverage the insights gathered by data bank. The predictive
underwriting model aid in determining and targeting the more profitable markets
and customers and allows to accurately price coverage.
The
company views young people as an important customer group to build long-term
relationships as they progress through normal lifecycle events, their potential
insurance needs grow and encompass higher-value products.
Go
Digit General Insurance focuses on making it simpler for customers to
understand products and to customize those products to fit their needs and
budgets. It leverages front-end technology that customers are familiar with to
make it easier for them to file and check on the status of claims.
In
the back end, the company deploys software developed in house to speed up
underwriting and claims processing times. It collects
and deploys data to help to understand customers and to mitigate claims risks.
Assets
under management increased to Rs 14909 crore end December 2023.
The
Offer and the Objects
The initial public
offer (IPO) consists of fresh issue to raise Rs 1125 crore through issuance of
436.05 lakh equity shares at the lower band of Rs 258 per share (face value Rs
10 per share) and 413.6 lakh equity shares at the upper band of Rs 272 per
share.
The issue also
consists of offer for sale (OFS) of 547.66 lakh equity shares to raise Rs
1413-1490 crore. The promoter, Go Digit Infoworks Services, has offered 547.56
lakh equity shares for sales through OFS.
The promoter
shareholding in the company will decline to 73.6% post- IPO from 83.3% pre-IPO.
The issue is through
the book-building process and will open on 15 May 2024 and close on 17 May
2024.
The company proposes
to utilize the net proceeds from the fresh issue towards maintenance of
solvency ratio by investing in instruments in the manner prescribed under the
IRDAI Actuarial & Allied Regulations, 2024. Its solvency ratio stands at
1.6x end December 2023 as against the regulatory requirement of 1.5x. The solvency
ratio post-issue is expected to increase to 2.37x.
Strengths
The
company is redesigning insurance products and processes by offering relevant,
transparent, and customizable products, creating simple documentation and jargon-free
language for most products, and developing straightforward, paperless processes
powered by technology.
The
company has combined its expertise in the motor insurance market with a data
bank to build extensive underwriting models to accurately assess risk and
predict losses for motor insurance products at a granular level helping to better
manage costs.
The
company has built technology-enabled solutions enabling to achieve efficient
underwriting, a major differentiator among insurers. The platform is entirely
cloud-based, making the system agile, connected, and scalable.
The
focus on technology and straightforward and streamlined processes contributes
to a scalable and lean business model.
The
focus on supporting all partners through technology enables onboarding and working
with them in a cost-efficient manner, reducing the need for substantial
operations to support distribution partners.
The
use of technology and AI-driven microsystems, or bots, to streamline major
operations across the onboarding, underwriting, servicing, and claims processes
allows to deliver a simple and tailored customer and partner experience while
keeping employee base lean.
Consistent returns are generated
on investment book through a conservative investment approach.
The company serves the non-life insurance market in India,
the world’s fifth largest economy as of 2023. The overall market is estimated
to record a CAGR of 15-16%, reaching the value of US$66-69 billion from FY2023
to FY2028.
Despite
its size and growth, the Indian non-life insurance market remains highly
under-penetrated and fragmented. The insurance penetration rate of 1.0%
provides significant room for improvement, driven by a burgeoning middle-class,
rising awareness about insurance protection, innovative products, growth in
associated industries, and a favorable regulatory landscape.
Weaknesses
The
regulation relating to the insurance sector is evolving. Changes can impact the
business.
Due
to the inherent uncertainty in estimating reserves for losses and loss
adjustment expenses, there can be no assurance that the ultimate liability
associated with such reserves or expenses will not exceed the amounts reserved.
Maharashtra, Karnataka and Delhi, combined, accounted for
54.5% of revenues in 9MFY2024. Any decline in local economic conditions may
have an impact on business. Any catastrophic event in such locations may
significantly increase catastrophic reinsurance premiums and significantly increase
the level of claims and claim payouts.
Inability to verify and ensure the accuracy and completeness
of information provided by customers may lead to fraud, misrepresentation and
other similar risks
The predictive underwriting platform may not operate properly
impacting policies underwriting and claims processing.
The company uses technology in almost every aspect of business.
Success and growth of business depends upon the ability to maintain and improve
technology systems.
The business could be negatively affected by changes in
search engine logic or regulations of search engines and social media
platforms.
The
company expects to continue to make significant investments to further develop
and expand the business.
The expansion of coverage and increased prevalence of
government-funded health insurance schemes in the future may impact demand for
private health insurance.
About 95.7% of total health insurance premiums (accounting
for 14.9% of total GWP in 9MFY2024) was generated through group health
insurance.
The general insurance market in which the company operates is
highly competitive.
The insurance sector is subject to seasonal fluctuations in
product mix, operating results, and cash flow.
Valuation
Go
Digit General Insurance is a fast growing and a leading digital full stack
non-life insurance company. The company has continued to gain market share, improving
to 3.2% in FY2024 from 2.9% in FY2023. The company turned profitable in FY2023
and improved profitability further in 9MFY2024.
EPS
on post-issue equity for TTM ended December 2023 works out to Rs 1.7. At the
price band of Rs 258 to Rs 272, P/E works out to 153 to 161 times of EPS for
TTM ended December 2023.
Post-issue,
the book value (BV) including fair value change account-shareholders will be Rs
49.5 at the upper price band. The scrip is being offered at price to BV
multiple of 5.5 times at the upper price band.
Among
listed non-life insurers peers, New India Assurance is trading at P/ BV
multiple of 1.3 times (consolidated basis) and ICICI Lombard General
Insurance at 7.2 times (consolidated basis)
In
terms of PE, New India Assurance is trading at 40.0 times its EPS for TTM ended
December 2023 and ICICI Lombard General Insurance at 45.2 times (consolidated basis).
Go Digit General
Insurance: Issue highlights
|
For Fresh Issue Offer
size (in no of shares crore)
|
- On lower price band
|
4.36
|
- On upper price band
|
4.14
|
Offer size (in Rs
crore)
|
1125.00
|
For Offer for Sale
Offer size (in Rs crore)
|
- On lower price band
|
1412.97
|
- On upper price band
|
1489.65
|
Offer size (in no of
shares crore)
|
5.48
|
Price band (Rs)
|
258-272
|
Minimum Bid Lot (in
no. of shares )
|
55
|
Post issue capital (Rs
crore)
|
|
- On lower price band
|
919.45
|
- On upper price band
|
917.20
|
Post-issue promoter
& Group shareholding (%)
|
73.6
|
Issue open date
|
15-05-2024
|
Issue closed date
|
17-05-2024
|
Listing
|
BSE, NSE
|
Rating
|
40/100
|
Go Digit General
Insurance: Statement of Revenue Accounts
|
Particulars
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2212 (9)
|
2312 (9)
|
1. Premiums earned
(net)
|
1943.69
|
3404.23
|
5163.67
|
3767.32
|
5114.61
|
2. Profit / Loss on
sale/ redemption of investments
|
8.35
|
6.40
|
16.72
|
14.11
|
13.88
|
3. Others -
|
0.00
|
0.00
|
0.01
|
0.00
|
0.02
|
4. Interest, Dividend
& Rent Gross
|
233.01
|
349.00
|
610.79
|
443.31
|
625.90
|
Total (A)
|
2185.05
|
3759.46
|
5780.24
|
4214.63
|
5750.24
|
|
|
|
|
|
|
1. Claims Incurred
(net)
|
1438.97
|
2519.68
|
3471.39
|
2643.06
|
3559.99
|
2. Commission (net)
|
67.77
|
159.43
|
143.73
|
95.00
|
1389.43
|
3. Operating expenses
related to insurance business
|
863.75
|
1455.55
|
2231.39
|
1533.58
|
810.94
|
4. Premium deficiency
|
0.05
|
-0.05
|
0.00
|
0.00
|
0.00
|
Total Expenses (B)
|
2370.54
|
4134.61
|
5846.51
|
4271.64
|
5760.36
|
|
|
|
|
|
|
Operating Profit/ Loss
C=(A -B)
|
-185.49
|
-375.14
|
-66.28
|
-57.01
|
-10.12
|
APPROPRIATIONS
|
|
|
|
|
|
Transfer to P&L
Account
|
-185.49
|
-375.14
|
-66.28
|
-57.01
|
-10.12
|
Transfer to Other
Reserves
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
Go Digit General
Insurance: Statement of Profit & Loss Account
|
Particulars
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2212 (9)
|
2312 (9)
|
1. Operating profit/(loss)
|
-185.49
|
-375.14
|
-66.28
|
-57.01
|
-10.12
|
(a) Fire Insurance
|
-42.572
|
-41.748
|
22.082
|
6.218
|
-4.876
|
(b) Marine Insurance
|
-0.504
|
0.096
|
-6.817
|
-3.106
|
0.599
|
(f) Miscellaneous
Insurance
|
-142.416
|
-333.491
|
-81.54
|
-60.121
|
-5.845
|
|
|
|
|
|
|
2. Income from
investments
|
66.943
|
81.502
|
105.22
|
69.198
|
140.94
|
3. Other income
|
0
|
0
|
0.242
|
0.23
|
0.014
|
Total Income (A)
|
-118.55
|
-293.64
|
39.19
|
12.42
|
130.83
|
|
|
|
|
|
|
4. Provisions (Other
than taxation)
|
0
|
0
|
0
|
0
|
0
|
5. Other expenses
|
4.215
|
2.21
|
3.64
|
2.398
|
1.815
|
|
|
|
|
|
|
Total Expenses (B)
|
4.215
|
2.21
|
3.64
|
2.398
|
1.815
|
|
|
|
|
|
|
Profit before tax
(A-B)
|
-122.76
|
-295.85
|
35.55
|
10.02
|
129.02
|
Provision for taxation
|
0
|
0
|
0
|
0
|
0
|
Profit after tax
|
-122.76
|
-295.85
|
35.55
|
10.02
|
129.02
|
EPS (Rs) *
|
-1.3
|
-3.2
|
0.4
|
0.1
|
1.9
|
*EPS annualized on
post issue equity capital of Rs 917.2 crore of face value of Rs 10 each
Figures in Rs crore
Source: Go Digit General Insurance Issue Prospectus
|
|