Prem Watsa-Backed Digit Is Valued At $3.5 Billion. Here's How It Compares With Peers

The three-year-old online venture, backed by billionaire Prem Watsa, raised funds at a valuation of $3.5 billion (Rs 26,000 crore) last week, about six months after it turned a unicorn in January. That's close to the Rs 27,826.5 crore worth of market capitalisation for state-run New India Assurance Co.

Tech-backed companies are gaining as the pandemic accelerated digital shift. That has driven demand for initial public offerings of such firms. And India has also added record number of unicorns so far this year. Investors are betting on growth potential even as such firms show little profit in the first few years.

Funding And Key Investors

Backed by billionaire Prem Watsa's Fairfax Group and Faering Capital, Digit Insurance is raising $200 million (about Rs 1,400 crore) from the existing and new investors including Sequoia Capital India and IIFL Alternate Asset Managers, according to its statement. That will take the total capital infused to $442 million (Rs 3,200 crore) since inception. The latest funding is subject to regulatory approval.

“The capital raised is solely from the solvency perspective,” Kamesh Goyal, founder and chairman at Digit Insurance, told BloombergQuint. “We expect to maintain a 200-250% solvency ratio in FY22 (post capital infusion).”

45% of the company is owned by foreign investors as on July 5. Other stakeholders include TVS Capital Funds, A91 Partners, and cricketer Virat Kohli, also an employee of the insurer.

Business And Reach

While it's a digital insurer, Goyal said Digit has physical presence in more than 150 locations across the country and will continue expanding slowly.

• Gross premium rose 36.83% in 2020-21, according to data filed with insurance regulator. That compares with non-life industry’s 5.2% growth and 3.35% for private general insurers growth.

• In April-May 2021, gross premium rose 125.4% over a year earlier versus the industrywide growth of 17.51% and 14.38% for private peers.

In the quarter ended June, Covid insurance drove growth in the health segment, said Goyal. A strong corporate client portfolio has aided growth in the health and fire segments, he said.

Digit had launched Covid insurance and later a group Covid insurance product last fiscal, Chief Marketing Officer Vivek Chaturvedi told BloombergQuint. Granular pricing in motor insurance, otherwise a standard product, also worked quite well, he said.

The company, however, is much smaller than any of its peers with 1.2% market share. An industry-beating growth is coming on a low base.

Other Highlights for FY21

• Solvency ratio was 201%.

• Registered gross premium of Rs 3,243 crore.

• Reported a net loss of Rs 123 crore as per Indian accounting. standards, and a Rs 51 crore profit as per IFRS.

• Total assets under management at Rs 5,590 crore.

(Source: Digit Insurance)