Digit

[nwoodman]

17 minutes ago, smed said:

It's official, Go Digit is now visible at NSE by choosing "Upcoming IPOs" at the following link:

https://www.nseindia.com/market-data/all-upcoming-issues-ipo

 

Ticker/symbol: GODIGIT

Top stuff

[nwoodman]

There was an interesting article in  The Ken today regarding health insurance in Digit’s mix. Summary:

 

Summary

1. Go Digit, India's first insurtech unicorn, is launching its IPO on May 15 at a $3 billion valuation, lower than its last private valuation of $3.5 billion.

2. Go Digit's business mix is shifting, with motor insurance premiums falling from 93% to 70% of total premiums and health insurance premiums growing 26.8X from Rs 48 crore (3% of total premiums) in FY20 to Rs 1,288 crore (16% of total premiums) in FY24.

 

 

 

3. However, 96% of Go Digit's health insurance premiums come from the less profitable group insurance segment, concerning industry experts.

4. Go Digit's focus on group health insurance has led to a higher incurred claim ratio (93% in Q3 FY24) and a combined ratio of 109%, while competitors like Star Health are pivoting to more profitable retail policies.

5. According to industry insiders, insurers often focus on group health insurance as a "low-hanging fruit" to grow their topline and market share quickly, even if profitability suffers.

6. Go Digit remains committed to group health insurance in the near term, expecting to rely heavily on corporate clients for a substantial portion of its health insurance premium revenue.

 

 

 

7. Some believe Go Digit's strategy could work if it targets the right corporate segments, such as IT and startups willing to pay well for employee health benefits.

8. As a public company, Go Digit will face pressure to deliver both growth and profitability in the challenging group health insurance segment.

9. Founder Kamesh Goyal acknowledges that success in the stock market, like in life, is not a linear climb, and Go Digit will need to prove its ability to buck industry trends profitably.

 

Personally I think the pie is growing so fast it doesn’t really matter.  Also I would see the health data you are gathering for the Life business and vice versa as material.  This quote is salient for their future retail book of business:

 

“But why isn’t a venture capital-backed internet company like Go Digit giving top priority to retail customers just yet, especially when many are singing its praises?

“Go Digit has the best mobile app among all general insurers, and getting health insurance through it was incredibly convenient,” said a 32-year-old Chennai-based financial analyst who got introduced to the insurer through a short-term Covid-19 insurance provided by their employer. They have been renewing their policy for the past four years, paying Rs 20,000 (US$240) annually for Rs 20 lakh (US$24,000) coverage, which includes modern treatments like robotic surgeries.

 

Go Digit wanted to build brand recognition through corporate clients before diving into retail, but the shift won’t be a breeze. “It’s easy to attract users for motor insurance, but health or life insurance requires trust in the company,” as the Gurugram-based insurtech employee put it.

 

IMHO if there is one insurance executive that gets this, it is Kamesh Goyal 

Edited May 14, 2024 by nwoodman

[Hoodlum]

Here are some of the initial pre-IPO investors.  
 

https://www.ndtvprofit.com/amp/ipos/go-digit-mops-up-rs-1176-crore-from-anchor-issue-in-pre-ipo-fundraise

 

Go Digit General Insurance Ltd. has raised Rs 1,176 crore from anchor investors, ahead of its initial public offering. The company allotted 4.32 crore shares at Rs 272 apiece to 56 anchor investors.

 

The American multinational Fidelity Investments-backed fund got the highest allocation of 7.95%.

 

Goldman Sachs Funds (5.31%), Abu Dhabi Investment Authority (5.31%), Custody Bank of Japan (4.25%) and Bay Pons Partners (4.11%) are among the other marquee investors in the pre-IPO round fundraising.

 

Eleven domestic mutual funds have applied through a total of 23 schemes, the company said in an exchange filing on Tuesday. They have collectively netted 33.5% of the anchor portion of Rs 204 crore.

 

ICICI Prudential Mutual Fund, SBI Mutual Fund, Mirae Asset and Axis Mutual Fund are among the key investors in this category.

[Haryana]

There is a link on BSE listing the anchor investors -

https://www.bseindia.com/markets/MarketInfo/DownloadAttach.aspx?id=20240514-77&attachedId=e73ef530-5a28-43fa-815d-9f3dac7602d6

 

Also, the details of total (NSE+BSE) Bids by category -

https://www.bseindia.com/markets/publicIssues/CummDemandSchedule.aspx?ID=6575&status=L

 

Day 1 of 3:

Yet to have a full go at it by the Qualified Institutional Buyers.

Overall, underwhelming demand by Non Institutional Investors.

However, oversubscribed 1.4 times by Retail Individual Investors.

 

[Haryana]

Chairman Kamesh Goyal

 

 

[netcash1]

What is the IRDAI website for the non life monthly numbers please?

 

 

[nwoodman]

1 hour ago, netcash1 said:

What is the IRDAI website for the non life monthly numbers please?

 

 

The reports you are after are now published here: https://www.gicouncil.in/statistics/industry-statistics/flash-figures/

[netcash1]

A big thank you 

[Hoodlum]

The IPO had a big jump in share bids on the final day of the subscription.  I was a little worried yesterday as we had not met the required share allocation in some of the categories. This should help with a good open on the market next week. 
 

https://www.moneycontrol.com/news/business/ipo/go-digit-ipo-issue-subscribed-retail-investors-niis-qibs-virat-kohli-anushka-sharma-12724760.html/amp
 

The public issue was subscribed 3.7 times in the retail category. Non-institutional investors bought 4.17 times their allotted quota. The portion for qualified institutional buyers (QIBs) was booked nearly 9 times their portion, exchange data showed.

Edited May 17, 2024 by Hoodlum

[nwoodman]

23 minutes ago, Hoodlum said:

The IPO had a big jump in share bids on the final day of the subscription.  I was a little worried yesterday as we had not met the required share allocation in some of the categories. This should help with a good open on the market next week. 
 

https://www.moneycontrol.com/news/business/ipo/go-digit-ipo-issue-subscribed-retail-investors-niis-qibs-virat-kohli-anushka-sharma-12724760.html/amp
 

The public issue was subscribed 3.7 times in the retail category. Non-institutional investors bought 4.17 times their allotted quota. The portion for qualified institutional buyers (QIBs) was booked nearly 9 times their portion, exchange data showed.

Excellent.  I was following the QIB interest that @Haryana kindly posted above, it filled out nicely from what I saw earlier today.  This looks to be a “rip roaring success”

[nwoodman]

FWIW current Grey Market Pricing (GMP) stands at 9.6% above the allotment price ahead of Thursday’s listing

 

https://www.investorgain.com/report/live-ipo-gmp/331/

[treasurehunt]

On 5/21/2024 at 10:01 AM, Haryana said:

 

Now available on your link.

 

Also, on the company site - https://www.godigit.com/investor-relations/view-prospectus# 

 

 

Thanks. Lots of great information in the prospectus on the non-life insurance market in India and on Digit itself.

[nwoodman]

https://finance.yahoo.com/quote/GODIGIT.NS

 

First day of trade..for posterity.  Ended at around 5x’s GWP

 

 

Some recent contemporaries, take it or leave it in terms of relevancy

 

Lemonade Inc. (LMND)

• IPO Date: July 2, 2020
• IPO Price: $29 per share
• Opening Price: $50.06 per share
• Closing Price on First Day: $69.41 per share
• First Day Gain: +139.3%
• GWP Multiple: 13.8
• Most Recent Stock Price: $14.50

Root Inc. (ROOT)

• IPO Date: October 28, 2020
• IPO Price: $27 per share
• Opening Price: $27 per share
• Closing Price on First Day: $27.00 per share
• First Day Performance: 0%
• GWP Multiple: 14.9
• Most Recent Stock Price: $3.20

 

Oscar Health (OSCR)

• IPO Date: March 3, 2021
• IPO Price: $39 per share
• Opening Price: $36 per share
• Closing Price on First Day: $34.80 per share
• First Day Loss: -10.77%
• GWP Multiple: 3.3
• Most Recent Stock Price: $6.70

 

Hippo Holdings (HIPO) (via SPAC Merger with Reinvent Technology Partners Z)

• Merger Close Date: August 3, 2021
• Initial Trading Price: $10.00 per share (SPAC standard price)
• Closing Price on First Day: $8.50 per share
• First Day Loss: -15%
• GWP Multiple: 12.3
• Most Recent Stock Price: $1.60

Summary

 

 Lemonade Inc. (LMND): Had a highly successful debut with a 139.3% gain but is currently trading at $14.50, a 50.0% loss from its IPO price.

 

Root Inc. (ROOT): Had a flat debut with no change in stock price on the first day, currently trading at $3.20, an 88.1% loss from its IPO price.

Oscar Health (OSCR): Experienced a decline of 10.77% on its first day and is now trading at $6.70, an 82.8% loss from its IPO price.

Hippo Holdings (HIPO): Saw a 15% decline on its first day after the SPAC merger and is now trading at $1.60, an 84.0% loss from its initial trading price.
 

My take (but really what a bunch of smart people who actually matter):

 

Fairfax (Digit) gets one chance to do this right and be accretive to all stakeholders.  I think they have threaded the needle.

 

 

 

Edited May 23, 2024 by nwoodman

[giulio]

Started reading the docs. I understand that the convertible notes are still an issue. They have not been converted and Fairfax is working on a solution. Fairfax will own 68.65% max when (if) conversion happens.

Something to ask on the next cc.

[newtovalue]

Apologies if this has been discussed before - but now that Digit is public - any idea what the impact to book value will be when Fairfax reports Q2?

 

[gfp]

9 minutes ago, newtovalue said:

Apologies if this has been discussed before - but now that Digit is public - any idea what the impact to book value will be when Fairfax reports Q2?

 

 

I wouldn't expect much, if any, change to FFH book value from the Digit IPO.

[dartmonkey]

7 hours ago, nwoodman said:

https://finance.yahoo.com/quote/GODIGIT.NS

 

First day of trade..for posterity.  Ended at around 5x’s GWP

 

 

Some recent contemporaries, take it or leave it in terms of relevancy

 

 

My take (but really what a bunch of smart people who actually matter):

 

Fairfax (Digit) gets one chance to do this right and be accretive to all stakeholders.  I think they have threaded the needle.

 

 

 

The whole process seems downright mediaeval to me, with its price bands, its GMP (grey market premium), its alotment dates, its public and private subscriptions, the 55 share block requirement (why on earth 55??), the concern about whether the IPO is 'successful' or not because it pops on day 1, etc. I know this is not so different from North American IPOs, but why so much drama? Why not just offer blocks of shares on the market, with a bid and an ask, and do it at the price that settles, like an auction? Does it have to be this complicated?

[MMM20]

1 minute ago, dartmonkey said:

Does it have to be this complicated?

 

Welcome to India!

[SafetyinNumbers]

7 minutes ago, dartmonkey said:

The whole process seems downright mediaeval to me, with its price bands, its GMP (grey market premium), its alotment dates, its public and private subscriptions, the 55 share block requirement (why on earth 55??), the concern about whether the IPO is 'successful' or not because it pops on day 1, etc. I know this is not so different from North American IPOs, but why so much drama? Why not just offer blocks of shares on the market, with a bid and an ask, and do it at the price that settles, like an auction? Does it have to be this complicated?

The actual ceremony was very dramatic! A few songs (including the Indian national anthem), lots of speeches and a candle lighting ceremony. 
 

The replay is available in the link below.

 

 

Edited May 23, 2024 by SafetyinNumbers

[SafetyinNumbers]

1 hour ago, gfp said:

 

I wouldn't expect much, if any, change to FFH book value from the Digit IPO.

I assume we’ll see an increase in fair value over carrying value but for the most part investors don’t care about that yet. 

[nwoodman]

2 minutes ago, dartmonkey said:

 Does it have to be this complicated?

Isn’t it crazy and looking back over the last three years it was infuriating.  I’ll bet in the next 3 years it will be why bother.  Then in 5 years that was a no brainer triple or 5 bagger.  It is the way.

[dartmonkey]

6 minutes ago, SafetyinNumbers said:

The actual ceremony was very dramatic! A few songs (including the Indian national anthem), lots of speeches and a candle lighting ceremony. 
 

The replay is available in the link below.

That IS impressive, I love it! 

 

I don't at all mind the ceremony, on the contrary, but the business end of it, it is the setting the price of the IPO that seems archaic to me. Does anyone think such  a process wil be around when companies issue shares in a hundred years? It seems like a lot of work for nothing, not even getting the best price for the issuing company and not properly insuring that everyone has an equal access to buying the shares they might want to buy.

 

As woodman points out, what is important is how the company does in the next 3-5-10-20 years, not whether it came out at 250 rupees or 300, and whether it popped 10% the first day or the first month.

 

Anyway, file this away as a pointless gripe, it is what it is, and the company seems to have navigated through this complex landscape in a satisfactory way.

[A_Hamilton]

What is everyone's understanding of FFH's ownership in the Digit assets?

Here's what I understand

-FFH owns 49% of GoDigit Infoworks Services Private Limited ("GoDigit Insurance" - not GoDigit General Insurance LTD ("Digit") which is a sub of GoDigit Insurance. Digit is the entity that went public not GoDigit Insurance.

-Upon a change in Indian Law to allow foreign ownership, FFH can own up to 68% of GoDigit Insurance. 

    Questions: How is the increase from 49% to 68% priced? Just a pure conversion with no cost, or per some preestablished valuation mechanism?

Also, If FFH owns 49% of this entity, could it sell down to say 45% and then top position back up to 49% and then have a contingency to only be able to own up to 64%?

-On pg 73 of its annual, FFH notes a Fair Value for GoDigit Insurance of $477.2 million and a carrying value of $146.6. This is seemingly in direct contrast to page 18 of the annual (prem's letter) which states a cost of $154 million and a 12/31/2023 of $2.265 billion. I suppose the difference is the convertible preferred?

-FFH also owns 24.2% of digit life. It isn't clear to me if this is a sub of either entity above?

 

Anyway, this is a homerun for FFH but I wish the annual were a bit clearer on what is owned and how any convert of compulsory prefs might work.

 

 

Edited May 23, 2024 by A_Hamilton

[SafetyinNumbers]

1 hour ago, A_Hamilton said:

What is everyone's understanding of FFH's ownership in the Digit assets?

Here's what I understand

-FFH owns 49% of GoDigit Infoworks Services Private Limited ("GoDigit Insurance" - not GoDigit General Insurance LTD ("Digit") which is a sub of GoDigit Insurance and is the entity that went public. 

-Upon a change in Indian Law to allow foreign ownership, FFH can own up to 68% of GoDigit Insurance. 

    Questions: How is the increase from 49% to 68% priced? Just a pure conversion with no cost, or per some preestablished valuation mechanism?

Also, If FFH owns 49% of this entity, could it sell down to say 45% and then top position back up to 49% and then have a contingency to only be able to own up to 64%?

-On pg 73 of its annual, FFH notes a Fair Value for GoDigit Insurance of $477.2 million and a carrying value of $146.6. This is seemingly in direct contrast to page 18 of the annual (prem's letter) which states a cost of $154 million and a 12/31/2023 of $2.265 billion. I suppose the difference is the convertible preferred?

-FFH also owns 24.2% of digit life. It isn't clear to me if this is a sub of either entity above?

 

Anyway, this is a homerun for FFH but I wish the annual were a bit clearer on what is owned and how any convert of compulsory prefs might work.

 

 

 

This is what I came up with but I’m not 100% sure.

 

[zhuanquan]

On 5/24/2024 at 2:16 AM, A_Hamilton said:

What is everyone's understanding of FFH's ownership in the Digit assets?

Here's what I understand

-FFH owns 49% of GoDigit Infoworks Services Private Limited ("GoDigit Insurance" - not GoDigit General Insurance LTD ("Digit") which is a sub of GoDigit Insurance. Digit is the entity that went public not GoDigit Insurance.

-Upon a change in Indian Law to allow foreign ownership, FFH can own up to 68% of GoDigit Insurance. 

    Questions: How is the increase from 49% to 68% priced? Just a pure conversion with no cost, or per some preestablished valuation mechanism?

Also, If FFH owns 49% of this entity, could it sell down to say 45% and then top position back up to 49% and then have a contingency to only be able to own up to 64%?

-On pg 73 of its annual, FFH notes a Fair Value for GoDigit Insurance of $477.2 million and a carrying value of $146.6. This is seemingly in direct contrast to page 18 of the annual (prem's letter) which states a cost of $154 million and a 12/31/2023 of $2.265 billion. I suppose the difference is the convertible preferred?

-FFH also owns 24.2% of digit life. It isn't clear to me if this is a sub of either entity above?

 

Anyway, this is a homerun for FFH but I wish the annual were a bit clearer on what is owned and how any convert of compulsory prefs might work.

 

 

 

Hi there, I think most of this information is set out in the Digit Prospectus (search for "CCPS") (https://www.godigit.com/content/dam/godigit/general/investor-relations/euclid/project-euclid-prospectus-may-17-2024-final-filing-version.pdf). Some interesting points to note:

 

"The issued, subscribed and paid-up share capital of Go Digit Infoworks Services Private Limited as on the date of this Prospectus is as follows: Particulars Aggregate value at face value 1,022,934 equity shares of ₹ 10 each 10,229,340 7,800,000 CCPS of ₹ 1,000 each 7,800,000,000 Total 7,810,229,340*"

 

- this is a big difference from the estimated FV of the CCPS in Fairfax's books but note that Fairfax's methodology uses a DCF, which given the high discount rate (12%) would imply that their estimates of cash flow are very high - which we can compare vs the financials set out in the prospectus.

 

- I wonder how the IPO would change the FV of the CCPS given there's now an indirect public MTM (since the CCPS can be converted into Digit's (listed) equity. The conversion ratios suggest a very big mark down of the FV of the CCPS - though the FV would then be the higher of the equity conversion and the face value of the CCPS.

 

"The key terms of the CCPS are: (i) the CCPS holder is entitled to cumulative preferential dividend of 12.3% per annum on the face value of the CCPS in each financial year, however to the extent any CCPS are converted into equity shares of GDISPL, there is no dividend which is due or payable on such CCPS, (ii) if GDISPL declares any dividend or other distribution to its holders of equity shares, the CCPS holder is also entitled to the aggregate amount of dividend or other distribution which it would have received if it were the holder of the maximum number of equity shares into which its CCPS can be converted, on the record date for such distribution, (iii) no dividend or distribution will be paid or declared in respect of any equity shares of GDISPL if, and to the extent that, as a consequence of such dividend or distribution, any CCPS holder would be entitled to dividend greater than the maximum amount permitted to be paid in respect of CCPS of an Indian company held by a non-resident under applicable laws; (iv) the maximum tenure of the CCPS is 20 years from the date of issuance, unless extended by the CCPS holder, subject to applicable law; (v) in terms of the JV Amendment Agreement, the CCPS has a fixed conversion ratio for conversion into equity shares of GDISPL being (i) 2.324 CCPS for each equity share, for 6,300,000 CCPS; and (ii) 3.55 CCPS for each equity share for the remaining 1,500,000 CCPS, subject to the maximum permissible limit under applicable laws and the provisions of the JV Agreement, and would be cumulatively converted such that the CCPS holder holds equity shares of GDISPL representing up to a maximum of 82.07% of the share capital of GDISPL. Further, consequent to conversion of the CCPS, the indirect shareholding of FAL in our Company (on a fully diluted basis) will be a maximum of up to 68.65%. Further, upon conversion of the CCPS, none of our Promoters shall cease to act as promoters of our Company."

 

 

Edited May 29, 2024 by zhuanquan