Digit

[Haryana]

https://www.godigit.com/investor-relations/view-rhp#disclaimerModal

Disclaimer

THESE MATERIALS ARE NOT DIRECTED AT OR INTENDED TO BE ACCESSED BY PERSONS LOCATED OUTSIDE INDIA. THESE MATERIALS ARE BEING MADE AVAILABLE ON THIS WEBSITE TO COMPLY WITH SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2018, AS AMENDED.

IMPORTANT: You must read and agree with the terms and conditions of the following disclaimer before continuing.

The following disclaimer applies to the Red Herring Prospectus dated May 8, 2024 (“RHP”) of Go Digit General Insurance Company Limited (the “Company”) filed with the Registrar of Companies, Maharashtra at Pune and subsequently with Securities and Exchange Board of India (“SEBI”), BSE Limited and National Stock Exchange of India Limited (collectively, the “Stock Exchanges”), in relation to the initial public offering of the equity shares of face value of ₹ 10 each (“Equity Shares”) of the Company (“Offer”) and hosted on this website. In accessing the RHP, you agree to be bound by the following terms and conditions, including any modifications to them from time to time.

The RHP are directed at, and is intended for distribution to, and use by, residents of India only. The information in this portion of our website, including the RHP, are not for publication or distribution, directly or indirectly, in or into the United States. No part of the contents of the RHP shall be copied or duplicated in any form by any means, or redistributed.

...

Any person into whose possession the RHP comes is required to inform himself or herself about and to observe any such restrictions. Neither the Company nor any of its affiliates is soliciting any action based on the RHP, and it should not be construed as an offer to sell or the solicitation of an offer to buy any securities. Potential investors should not rely on the RHP for any investment decision. The Offer and sales of the Equity Shares to be offered in the Offer shall be made only pursuant to the Red Herring Prospectus (when available).

...

 

[nwoodman]

@Haryana Good stuff!

[SafetyinNumbers]

It seems like FFH has marked its stake in Digit at ~US$1.9b being the sum of the compulsory preferred fair value and the common carrying value. If the IPO is being done at Rs 272 or ~US$3.25 at prevailing exchange rates and the pre-IPO share count is ~875m, then the pre raise market cap is ~US$2.85b. I recall seeing somewhere FFH had a 68% stake which means we wouldn’t see much of a gain on listing as that works out to ~US$1.9b.

 

Does that make sense? 

 

If anyone has a better idea please share! I’m trying to understand how this all plays out for book value in Q2.

[nwoodman]

18 minutes ago, SafetyinNumbers said:

It seems like FFH has marked its stake in Digit at ~US$1.9b being the sum of the compulsory preferred fair value and the common carrying value. If the IPO is being done at Rs 272 or ~US$3.25 at prevailing exchange rates and the pre-IPO share count is ~875m, then the pre raise market cap is ~US$2.85b. I recall seeing somewhere FFH had a 68% stake which means we wouldn’t see much of a gain on listing as that works out to ~US$1.9b.

 

Does that make sense? 

 

If anyone has a better idea please share! I’m trying to understand how this all plays out for book value in Q2.

It does but the good news is we are about to find out .  

 

If this goes full fintech then I would expect at least a $3.5bn market cap (4x’sGWP).  Their 68% gets marked at $2.4bn.  Your guess is as good as mine though.  

 

The only thing I can say with reasonable confidence is that Digit is likely to be worth a lot more than the current carrying value in 10 years time

 

 

Key Dates:

1. Bid/Offer Opening Date: Wednesday, May 15, 2024
2. Bid/Offer Closing Date: Friday, May 17, 2024
3. Finalisation of Basis of Allotment: On or about Tuesday, May 21, 2024
4. Initiation of Refunds/Unblocking of Funds: On or about Wednesday, May 22, 2024
5. Credit of Equity Shares to Depository Accounts: On or about Wednesday, May 22, 2024
6. Commencement of Trading on the Stock Exchanges: On or about Thursday, May 23, 2024 .

 

 

 

[lathinker]

Thanks for the work you are doing. I tried to find out the value from the prospectus and looked at the section "Our Promoters and Promoter Group" which shows "Go Digit Infoworks Services Private Limited" (GDISPL) will hold 729,565,220 shares. This is the Fairfax / K. Goyal vehicle.

 

Then, looking at the shareholding for GDISPL, it shows that Fairfax Asia Limited (FAL) owns 45.25% of the equity in GDISPL plus all the CCPs. If I read it correctly, the CCPs can be converted into 3.133m shares of GDISPL, bringing the FAL stake in GDISPL to 86.5%.

 

No my math for the Fairfax stake in Digit would be: 86,5%*729,565,220 Digit shares*3.25$/Digit shars = 2,050m USD

 

 

[nwoodman]

I see the price band being reported at 258-272 rupees.  I have searched through the red herring prospectus any reference to this price band is just a black circle.  Not sure if there is something funky going on with my pdf reader.  Can someone screen shot and upload a document that actually shows the floor and cap price as reported.  Thanks in advance

[gfp]

3 hours ago, nwoodman said:

 I have searched through the red herring prospectus any reference to this price band is just a black circle.  Not sure if there is something funky going on with my pdf reader.

 

That is what a 'red herring' preliminary prospectus is - a document with a bunch of blanked out sections because they haven't been solidified yet.  Even a reported range for the IPO price is subject to change based on demand.  272 INR per share seems low.  Even if they price the IPO at 272 it will probably open much higher.  There are "selling shareholders," however small, with cost basis of 250 INR / share.  

[gfp]

This article quotes the IPO price as being around $3 Billion USD, less than the last fundraising round.

 

https://www.moneycontrol.com/news/business/go-digits-kamesh-goyal-says-we-took-investor-feedback-to-decide-the-ipo-price-hope-to-give-them-value-12719353.html

[gfp]

I will just say that I have learned a lot about the Indian love for their cricket icon Virat Kohli through his name being included in virtually every mention of Digit on Indian financial media.  Being a resident of south Louisiana, United States, I was not up to date on famous cricketers and this guy sounds like the Michael Jordan of cricket.

[nwoodman]

7 minutes ago, gfp said:

 

That is what a 'red herring' preliminary prospectus is - a document with a bunch of blanked out sections because they haven't been solidified yet.  Even a reported range for the IPO price is subject to change based on demand.  272 INR per share seems low.  Even if they price the IPO at 272 it will probably open much higher.  There are "selling shareholders," however small, with cost basis of 250 INR / share.  

I get that, where is the actual prospectus that these articles are referring to?  I guess this is the first Indian IPO I have ever actually been interested in and it is bizarre.  

[gfp]

On 5/9/2024 at 7:22 AM, gfp said:

The final prospectus will show up at this link when it is final:

https://www.sebi.gov.in/sebiweb/home/HomeAction.do?doListing=yes&sid=3&ssid=15&smid=12

 

 

RE: "I get that, where is the actual prospectus that these articles are referring to?  I guess this is the first Indian IPO I have ever actually been interested in and it is bizarre.  "

Edited May 10 by gfp

[hasilp89]

1 hour ago, gfp said:

I will just say that I have learned a lot about the Indian love for their cricket icon Virat Kohli through his name being included in virtually every mention of Digit on Indian financial media.  Being a resident of south Louisiana, United States, I was not up to date on famous cricketers and this guy sounds like the Michael Jordan of cricket.

yup he's a legend, he's getting up there with Sachin Tendulkar and still has some years in him. He'll be in the states this summer. India vs. Pakistan tickets going for $1k+  . Definitely someone positive to have Digit's name identified with. 

 

one quick snapshot of what he does and then i'll be quiet.

 

 

 

 

Edited May 10 by hasilp89

[nwoodman]

9 minutes ago, gfp said:

 

 

RE: "I get that, where is the actual prospectus that these articles are referring to?  I guess this is the first Indian IPO I have ever actually been interested in and it is bizarre.  "

We must be on different planets or operating systems.  Screen shot and post if you are actually seeing what they are reporting.  Spoon feed me!

[gfp]

Just now, nwoodman said:

We must be on different planets or operating systems.  Screen shot and post if you are actually seeing what they are reporting.  Spoon feed me!

 

Did you read my post either time I posted it?  It will show up at that link when it is final.  Every word in a sentence is important.

[nwoodman]

Just now, gfp said:

 

Did you read my post either time I posted it?  It will show up at that link when it is final.  Every word in a sentence is important.

The point is where is the media getting their spread in terms of their pricing from now?  

[nwoodman]

5 minutes ago, nwoodman said:

The point is where is the media getting their spread in terms of their pricing from now?  

“Go Digit IPO sets Rs 258-272 per share price band; bids open on May https://www.business-standard.com/markets/ipo/go-digit-ipo-sets-rs-258-272-per-share-price-band-bids-open-on-may-15-124051000481_1.html

 

No problems if that is the case but  where are they getting that number from?  The only thing that is official has that number blanked out

 

[gfp]

The article I linked to above was quoting Kamesh Goyal so I would say that is a credible source.  This is all very similar to how a US IPO works.  Leaks and rumors about pricing, subject to change leading into the final announcement, IPO prices set a bit low to hopefully get a nice enthusiastic pop on day one, etc. etc..

[nwoodman]

2 minutes ago, gfp said:

The article I linked to above was quoting Kamesh Goyal so I would say that is a credible source.  This is all very similar to how a US IPO works.  Leaks and rumors about pricing, subject to change leading into the final announcement, IPO prices set a bit low to hopefully get a nice enthusiastic pop on day one, etc. etc..

OK, so absolutely nothing offical to fill in the black dots.  All I needed to know.  

[SafetyinNumbers]

36 minutes ago, gfp said:

The article I linked to above was quoting Kamesh Goyal so I would say that is a credible source.  This is all very similar to how a US IPO works.  Leaks and rumors about pricing, subject to change leading into the final announcement, IPO prices set a bit low to hopefully get a nice enthusiastic pop on day one, etc. etc..

They seem to have a liquid grey market and there seems to be a reliable grey market premium for those who get allocations to do a quick flip. 
 

This article suggests it’s trading above Rs 350 in the grey market.

 

https://thearcweb.com/article/go-digit-ipo-valuation-fairfax-prem-watsa-fyeU0WSqN1fQY2G6

[nwoodman]

@SafetyinNumbers. That's quite interesting.  To be honest as as much as I would like the sugar hit to book I would much prefer them to have a stellar IPO record in India i.e stag and long term.  Let Recipe, Farmers Edge and the like never be repeated.  You get it right in India in terms of raising capital and delivering and you have a Lollapalooza.

 

Edit:  Anchorage being next

Edited May 10 by nwoodman

[dartmonkey]

41 minutes ago, nwoodman said:

OK, so absolutely nothing offical to fill in the black dots.  All I needed to know.  

Apparently, they have announced the price range, today: 

 

The company announced a price range of Rs 258-272 on Friday, May 10, 2024.  Read more at: https://thearcweb.com/article/go-digit-ipo-valuation-fairfax-prem-watsa-fyeU0WSqN1fQY2G6

 

I don't know WHERE they announced it, but it doesn't seem to be just a rumour.

Edited May 10 by dartmonkey

[nwoodman]

21 hours ago, dartmonkey said:

Apparently, they have announced the price range, today: 

 

The company announced a price range of Rs 258-272 on Friday, May 10, 2024.  Read more at: https://thearcweb.com/article/go-digit-ipo-valuation-fairfax-prem-watsa-fyeU0WSqN1fQY2G6

 

I don't know WHERE they announced it, but it doesn't seem to be just a rumour.

No problems I would just love to know where

Edited May 11 by nwoodman

[Hoodlum]

Here on some additional comments from Kamesh Goyal on their decision to lower the IPO price.  They also decided to reduce number of shares on offer by 40%, as non-convertible debt secured in December has reduced the need for additional funding.  

 

https://www.moneycontrol.com/news/business/go-digits-kamesh-goyal-says-we-took-investor-feedback-to-decide-the-ipo-price-hope-to-give-them-value-12719353.html

 

Quote

As Go Digit General Insurance gears up for an IPO, Chairman Kamesh Goyal said the company decided to fairly price the issue as suggested by the investment bankers and feedback from the investors.

Goyal said multiple factors have gone into consideration to price the issue in a fair manner for it to leave reasonable value for the investors.

 

“People (companies) who are coming now are coming at a lower value. This (price range) is what bankers suggested. Customers or potential retail investors should be happy. We took investors feedback. Further, there is a value that we want to leave for the investor on the table,” he said during a pre-IPO meeting held in Mumbai.

The Prem Watsa’s Fairfax group-backed firm has fixed its price band in the range of Rs 258- 272 per share of the face value of Rs 10.

Digit was valued at $3.58 billion (as of 2022-23) in the last private round. The issue price values the company at a little less than $3 billion.
 

The insurtech firm, which has downsized its issue by more than 40 percent, is seeking to raise primary capital of Rs 1,125 crore instead of the earlier planned Rs 1,250 crore.
 

The offer for sale (OFS) has also been slashed by almost 50% from 109.4 million shares to 54.8 million shares (worth Rs 1489.62 crore).
 

While the primary capital raised is used to fund the business operations and expansion, the OFS is typically to allow existing investors to sell shares and realise profits.

 

On the reduced issue size, the Chairman said, “Our primary offering was Rs 1250 crore initially. Because IPO got delayed and we raised non-convertible debentures worth Rs 200 crore. So our overall requirement for capital went down.”
 

As per the RHP, the Board of directors on December 11, 2023, had approved raising of capital by issuance of Non-Convertible Debentures (NCDs) up to Rs 2,000 million (Rs 200 crore) on a private placement basis.

 

 

[dartmonkey]

2 hours ago, Hoodlum said:

We took investors feedback. Further, there is a value that we want to leave for the investor on the table,” he said during a pre-IPO meeting held in Mumbai.

The Prem Watsa’s Fairfax group-backed firm has fixed its price band in the range of Rs 258- 272 per share of the face value of Rs 10.

Digit was valued at $3.58 billion (as of 2022-23) in the last private round. The issue price values the company at a little less than $3 billion.
 

The insurtech firm, which has downsized its issue by more than 40 percent, is seeking to raise primary capital of Rs 1,125 crore instead of the earlier planned Rs 1,250 crore.
 

The offer for sale (OFS) has also been slashed by almost 50% from 109.4 million shares to 54.8 million shares (worth Rs 1489.62 crore).

 

I guess this might make for a 'successful' IPO, successful for investors at least, even if selling shares to the public below what someone might have paid for them is not usually what the other shareholders would want. At least it's not too dilutive, given that it is only selling about 42m shares, out of 874m shares outstanding, or a little less than 5% of the company. 

 

But if they are selling 40% less shares, at a lower per-share price, how can they expect to raise Rs 1125 instead of 1250 crore? If they sell at the middle of their target range, Rs 265/share, they would need to sell 42.45m shares to raise Rs 1,125 crore. If that represents a 40% cut in the number of shares, that would have been 70.75m shares they previously intended to issue. If they expected to raise Rs 1,250 crore, that means they intended to sell them at just Rs 177/share, which doesn't jive with the idea that they have marked down the price to get an IPO pop.

 

Anyways, most of these questions will be resolved in a week when we have a share price on the NSE and BSE.

[Matthew Lembo]

Anyone have any insight into if once digit starts writing insurance at < 100% CR if it will start to invest its profits in equities (both public and private) and slowly morph into a conglomerate with a similar business model to brk/ffh/mkl over time? 
 

would seem like a logical next step given BRK/FFH success. 

 

Separately, Prem mentioned that FFH manages float of majority owned insurance subsidiaries. I don’t think this applies to Digit but don’t know for sure. Does anyone know?