Fairfax Group-backed Digit Insurance is considering raising about $500 million via an initial public offering (IPO) at a valuation of $4.5-5 billion, Reuters reported.
The firm plans to file its draft documents to the markets regulator by September and list by January, people aware of the matter told Reuters. It has appointed Morgan Stanley and Indian investment bank ICICI Securities as book runners for the deal, they added.
As per the report, Digit is trying to capitalise on India's under-penetrated general insurance market along with users' need for a better customer experience like easier claim settlements, though IPOs in the country have not done well in the past few months.
Digit was valued at close to $4 billion earlier this month when it raised a tranche of funding, according to Reuters, which added that Digit has so far raised more than $400 million from Sequoia Capital, A91 Partners and Faering Capital, besides Fairfax.
However, one must note that Indian start-ups also have found it difficult to raise money privately this year after a boom in 2021.
India's biggest public offering - Life Insurance Corp - dropped 7.8 percent on debut this month after it raised $2.7 billion. Meanwhile, Paytm also fell on its debut last November following a $2 billion IPO.
India's insurance regulator requires companies in the sector to be at least five years old before going public, which Digit will fulfill by September. Digit plans to raise money by offering new shares along with Fairfax, its largest shareholder with about 30 percent, trimming its stake, sources added.
Digit has served more than 20 million customers across car, bike, health and travel insurance, as per its website. Its revenue surged 62 percent to about $675 million in FY22, outperforming the industry's 11 percent rise, noted Reuters.
However, the company recorded a net loss of $7.8 million on revenue of $309 million FY21, but its latest profit or losses could not immediately be ascertained, it added.
Bankers told Reuters that demand for Digit's IPO will depend on how it prices its shares, in addition to macroeconomic factors as Inflation fears and rising interest rates are weighing on IPO demand in India and abroad.
"Digit is growing fast, so by the time they start talking to IPO investors, the $4 billion valuation will seem outdated," one banker told Reuters. "Given they don't burn cash, it is an attractive proposition for institutional investors," the banker added.
However, the spokesperson for Digit declined to comment on "speculation".