Go Digit IPO Valuation Slashed by 25% to $3bn

Go Digit, a prominent general insurance company, has launched its initial public offering (IPO) valued at Rs 2,615 crore ($313 million). This IPO is set to hit the market with a valuation of Rs 25,000 crore ($3 billion) in the coming week. The announcement was made public on Friday, May 10, 2024, with a price range of Rs 258-272 per share.

This valuation marks a considerable reduction of up to 25% compared to Go Digit’s previous private-market evaluation, which stood at Rs 33,800 crore ($4 billion).

According to The Arc Research, this move positions Go Digit as the first Indian unicorn to pursue an IPO at a valuation lower than its private-market level, a strategy previously adopted by companies such as Reddit and Instacart in the US.

The IPO size has been scaled down by over 40%, with the primary capital sought reduced to Rs 1,125 crore from the initial target of Rs 1,250 crore. Additionally, the offer for sale (OFS) component has been slashed from 109.4 million shares to 54.8 million shares. The OFS segment allows existing investors to sell their shares without contributing to the company’s capital expansion.

Despite the reduction, the OFS portion in Go Digit’s IPO remains substantial, estimated at approximately Rs 1,490 crore. The IPO is being steered by Go Digit Infoworks, the company’s parent entity, jointly owned by founder Kamesh Goyal and Canada’s Fairfax Holdings.

An investment banker familiar with the listing process highlighted Go Digit’s strategic move to create sufficient room for potential pre-IPO investors’ exits without negatively impacting share prices post-IPO. The banker cited recent instances where other unicorn IPOs in India experienced share price declines post-listing, emphasizing Go Digit’s cautious approach.

Notably, Go Digit’s shares are already trading in the grey market at over Rs 350, indicating early investor interest.

Key investors, including Peak XV Partners (Sequoia India), Wellington Management, and India Infoline, are expected to witness losses based on the IPO price compared to their entry prices.

However, early backers such as A91 Partners and TVS Capital stand to realize significant returns. For instance, A91 Partners, with a Rs 245 crore investment, anticipates over three times the IPO price returns.

Go Digit’s financials reveal a mixed picture, with reported losses of Rs 30 crore in FY22, followed by a net profit of Rs 129 crore during April-December 2023, signaling a remarkable recovery.

As the market eagerly awaits Go Digit’s IPO debut, all eyes are on its performance and the broader implications for India’s unicorn companies navigating the public markets.

Source: TheArc

Disclaimer: This information is covered based on the latest research and development available. However, it may not fully reflect all current aspects of the subject matter.

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