Go Digit General Insurance Limited IPO: 10 key risks investors should know

Up to 11:15 a.m. on day 1, the issue was subscribed 0.12 times overall, receiving bids for 63,35,890 shares against 5,28,69,677 offered. By that time, the retail portion had been subscribed 0.56 times, and the portion reserved for non-institutional investors(NIIS) had been subscribed 0.06 times.

Go Digit IPO earned 1,176.59 crore from anchor investors on Tuesday, May 14. According to the exchange filing, the company issued 4,32,57,009 equity shares to anchor investors at a price of 272 per share.

Also Read: Go Digit IPO opens today: GMP, subscription status, review, other details. Apply or not?

The Go Digit General Insurance IPO is an offer-for-sale (OFS) of 54,766,392 equity shares by the promoters and other selling shareholders.

The company will use the net proceeds to support both the company’s regular commercial operations and the projects that are suggested to be funded by the net profits.

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Key details of Go Digit General Insurance Limited IPO (Mint)

Here are some of the key risks listed by the company in its Red-Herring Prospectus (RHP):

Also Read: Virat Kohli, Anushka-backed Go Digit IPO opens. How much celebrity couple earn?

1. In its RHP, the company said it has a track record of reporting losses, and it may not be able to maintain profitability in the future.

The company said, “Our limited operating history makes it difficult to accurately evaluate our future business prospects.”

2. The company’s current loss reserves are based on estimates of future claim liability. If they prove inadequate, further increases in reserves could eventually adversely affect its operations.

3. As prescribed under the Insurance Act, the company must meet the mandatory control level of solvency margin. The company said, it could be subject to regulatory actions which can slow down its growth.

4. Natural disasters, terrorist attacks, and other catastrophic events could significantly increase customer claims. This can cause losses in the company’s investment portfolio and damage its business, financial condition, and operations.

5. The outstanding legal proceedings involving the company, its promoters and directors may impact the company negatively.

6. The Insurance Regulatory and Development Authority (IRDAI) has issued warnings, show-cause notices, and imposed penalties against the company due to non-compliance with various regulatory prescriptions in the past. The company could be subject to such regulatory actions in the future. The company remains subject to extensive supervision and regulatory inspections by IRDAI.

Also Read: Virat Kohli-backed Go Digit General Insurance IPO announces price band at 258-272 apiece; check GMP, issue size, more

7. Motor vehicle insurance products substantially contribute to the company’s revenue and profitability. Any constraint on selling these products due to regulatory changes and changing customer preferences could have a material impact on the company’s business.

8. The company’s business can be adversely affected if it fails to underwrite risks accurately and change competitive premiums to its customers.

9. Denial of claims or failure to accurately and timely pay claims could affect the company’s business prospects.

10. Credit risks related to its investments and day-to-day operations may cause losses.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.

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Published: 15 May 2024, 11:59 AM IST

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