IPO: Go Digit General Insurance

Go Digit, a leading general insurance company in India is launching its IPO (initial public offering) on May 15, 2024. Below is a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision. In a nutshell Quality : Go Digit's three-year average ROE (return on equity) and solvency ratio are -8.4 and 1.9 times, respectively. Growth : Its net premium income and net profit grew by 63 and 51.3 per cent per annum, respectively, between FY21 and FY23. Valuation : The stock is valued at a P/E (price to earnings) of 161 times compared to its peers' median level of 37.8. It is valued at a P/B (price to book) of 10.1 times compared to its peers' average of 3.8 times. Overview : Go Digit is a prominent digital full-stack insurer in India's underpenetrated general insurance market. With the growing Indian economy and rising consumer awareness, the company stands to benefit from the growth in the automobile and healthcare sectors. However, competition from larger industry players could hinder its future growth plans. About Go Digit General Insurance Incorporated in 2016, Go Digit General Insurance is a digital full-stack insurance company. It performs all major operations in-house, including sourcing, underwriting, servicing, etc. Go Digit currently offers 74 products under the general insurance category. Motor insurance is its largest segment, with a 61 per cent share in the total gross written premium and an overall market share of 6 per cent as of the nine months ending December 2023. This segment is followed by 15 per cent in health and 11 per cent in property insurance as of the nine months ending December 2023. Strengths of Go Digit General Insurance Digital presence and aggressive pricing have helped the company gain significant market share, especially in the motor insurance segment, where it has emerged as the fourth largest private player with a market share of 6 per cent as of nine months ending December 2023. Go Digit is also the fastest-growing private player by gross written premium in FY23. Weaknesses of Go Digit General Insurance Go Digit was a loss-making entity until FY23 when it recorded a net profit of Rs 36 crore. However, its ROE remains in the lower single digits for FY24. Whether the company can make profitable strides going forward remains to be seen. Although underpenetrated and heavily regulated, the Indian insurance industry is highly competitive . Go Digit competes with larger private and government companies in the industry, forcing it to price its products aggressively, thereby squeezing its profit margins. The company's expense ratio of 39.1 per cent as of December 2023 is the highest among its listed competitors in the industry. IPO details Total IPO size (Rs cr) 3,740 Offer for sale (Rs cr) 2,615 Fresh issue (Rs cr) 1,125 Price band (Rs) 258-272 Subscription dates May 15-17, 2024 Purpose of issue Offer for sale and investment towards maintenance of solvency ratio Post-IPO M-cap (Rs cr) 24,947 Net worth (Rs cr) 3,584 Promoter holding (%) 73.6 Price/earnings ratio (P/E) 161 Price/book ratio (P/B) 10.1 Financial history