Go Digital General Insurance Limited IPO: Get Date, Price, Review and Details

Go Digit General Insurance Limited IPO Introduction:

Go Digit General Insurance Limited was incorporated on 07 December 2016. Currently, the company offers motor insurance, health insurance, travel insurance, property insurance, marine insurance, liability insurance, and other insurance products. The Company allows its customers to customize the products as per their needs.

As of December 31, 2023, the company has a broad distribution network across 24 states and union territories in India with 61,972 Key Distribution Partners. It has currently 74 active products. According to the RedSeer report, as of 31st Dec 2023, the company has captured approximately 4.3% market of the overall non-life insurance market.

Go Digit General Insurance Limited IPO Details:

IPO Date

15th May-2024 to 17th May-2024

Face Value

₹ 10/- per share

Price Band

₹ 258 to ₹ 272 per share

Lot Size

55 shares and in multiples thereof

Issue Size

₹ 2,614.65 crores

Fresh Issue

₹ 1,125 crores

OFS

₹ 1,489.65 crores

Expected Post Issue Market Cap (At upper price band)

₹ 24,947.9 crores


Objectives of Issue:

  • The company will utilize the net proceeds to maintain the solvency ratio.
  • To undertake its existing business activities.

Key Strengths:

  • Business Expansion Opportunity - Non-life insurance sector is expected to grow at CAGR 15-16%, reaching US$ 66-69 billion by the Financial Year 2028.
  • Customized Product – The company is offering customized insurance products as per the needs of customers. The customers can restructure their products as per the need through online mode, giving the company an extra edge in its operations.

Risks:

  • Solvency Ratio - The company’s solvency ratio is above the prescribed limit given by IRDAI, failing to control the same will impact the future operation of the business.
  • Concentrated product - Motor vehicle insurance products account for the majority of income, hence the overreliance on single-category products threatens business.
  • Regulatory Risk - It operates in a regulated industry and the insurance products are subject to changing laws, rules, regulations, and legal uncertainties.
  • Intense competition – It will be challenging for Go Digit General Insurance to acquire new market share as there are already established major companies in the general insurance industry who are performing better than the company.

Financial Snapshot:

Particulars

Nine months ended December 31, 2023

Nine months ended December 31, 2022

Financial Year 2023

Financial Year 2022

Financial Year 2021

Net Earned Premium

51,146.09

37,673.19

51,636.73

34,042.26

19,436.88

Retention Ratio

84.3%

79.1%

81.6%

79.4%

81.2%

Return on Net Worth

5.25%

0.44%

1.53%

-15.85%

-10.82%

Net profit

1,290.17

100.21

355.47

-2,958.51

-1,227.64

AUM

149,090.11

118,262.46

126,683.59

93,938.75

55,901.11

Solvency Ratio (times)

1.60

1.90

1.78

2.01

2.01

(Rs. In Million)

Retention Ratio – It refers to the portion of premiums that is kept on a company's books rather than passed on to reinsurance companies. A higher retention ratio indicates a company is retaining higher risk to itself, while a lower retention ratio means it's passing more risk to reinsurers.

Solvency Ratio - The solvency ratio of an insurance company is how much capital it has compared to the risk it has taken. It indicates an insurer's ability to meet its financial obligations.

Comparison with peers as of December 31, 2023

Expense Ratio - The expense ratio measures the costs an insurance firm incurs during the underwriting process. The lower the expense ratio better it is.

Claims ratio – The claim ratio is a percentage of claims that has been settled for a period in comparison with the total claims received.

Watch our Video on Go Digit General Insurance Limited IPO:

Conclusion:

The general insurance market penetration is low in India leaving it a big space for its growth but due to existing big players, it will be difficult for the company to gain market share. Following the rules and regulations along with business expansion and maintaining profitability will be a big task for the company.

The company’s most revenue comes from its motor vehicle insurance business which creates single-product dependency. Currently company is offering a high valuation, its price-to-earnings ratio is 670.31 which is way higher than the industry PE, and the price-to-book value ratio is 9.67.

Considering the industry’s intense competition, the company’s low growth potential, and high valuations, we suggest our investors avoid this IPO.

 

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