In a development that may be disappointing for the online insurer, the Securities and Exchange Board of India (SEBI) has moved Digit’s initial public offering (IPO) application to ‘abeyance’. This means that the process of issuance of observations for the startup’s filing has been put on hold.
Background
Digit is a five-year-old startup valued at $3.5 billion, backed by Fairfax and other prominent investors such as Sequoia Capital India, TVS Capital, A91 Partners, cricketer Virat Kohli, and actress Anushka Sharma. The startup filed the draft red herring prospectus to go public last month, seeking to raise about $440 million in the IPO.
Reasons for Putting IPO Application on Hold
According to SEBI’s guidelines, an application can be put on hold due to several reasons:
- Probable Cause for Investigation: If there is a probable cause for investigation, examination, or inquiry against the entities.
- Investigation Unable to Conclude: When the regulator is unable to conclude an investigation or enquiry due to reasons beyond its control or due to the conduct of parties other than the entities.
- Conduct of Entities: When the board is unable to conclude the investigation due to the conduct of the entities.
Digit’s Business Model and Financials
Digit sells auto, health, and travel insurance and is part of a group of firms attempting to expand the number of individuals in India that buy insurance coverage. Founded by Kamesh Goyal, an ex-KPMG executive with more than three decades of experience in the insurance industry, Digit has simplified the process of buying insurance, allowing users the ability to self-inspect, claim submissions, and process service requests from their smartphones.
The startup reported a total income of about $572 million and $37.29 million in losses for the fiscal year that ended in March. It distributes its insurance through 32,600 partners, including nearly 31,000 point-of-sale agents and brokers.
Global Market Conditions and Impact on Indian Startups
The move by SEBI comes at a time when several local startups have delayed their IPO plans as they closely monitor the condition of the global market. The global market has reversed much of the gains from the 13-year bull run, causing many startups to re-evaluate their plans.
Reactions and Next Steps
Digit did not immediately respond to a request for comment on Monday. It is unclear what the next steps will be for the startup or when its IPO application will be reconsidered by SEBI.
Impact on Indian Startups
The move by SEBI may have an impact on other Indian startups planning to go public in the near future. The global market conditions and regulatory delays can make it challenging for startups to raise capital through IPOs, affecting their growth plans.
Conclusion
The decision by SEBI to put Digit’s IPO application on hold is a setback for the online insurer’s plan to go public. The reasons behind this decision are not clear at present, but it may have an impact on other Indian startups planning to list their shares in the near future.
