Following regulator concerns, Digit Insurance to resubmit its $440 M IPO

Ila Dhond04/02/2023

200 1 minute read

According to Reuters, the firm informed that Digit Insurance would resubmit the paperwork for its $440 million initial public offering (IPO) after India’s market regulator identified a few compliance problems with employee stock plans in a letter to the company.

This setback to Digit’s plans for a listing is the second of its kind. General insurance services are offered by the business, which is backed by investors including Canadian billionaire Prem Watsa and was most recently valued at $3.5 billion by Sequoia Capital.

Due to a few compliance concerns about share issuances, the market regulator halted Digit’s IPO plan in September. However, the assessment was later resumed.

The Securities and Exchange Board of India (SEBI), in a letter dated Jan. 30 and seen by Reuters, stated that it was returning Digit’s IPO papers because the business had violated rules by giving workers so-called Stock Appreciation Rights.

With these rights, an employee is able to get a bonus that is equal to the increase in the company’s stock price over a specific time period, which is against Indian requirements for businesses going public.

In a letter that is both private and unreported, SEBI determined that Digit was “not qualified for launching an initial public offer”.

According to two unidentified sources with firsthand knowledge of the situation and who were not authorized to comment publicly, the company’s IPO has been postponed until it converts its employee stock rights into stock option plans and resubmits its paperwork to the regulatory body.

Digit acknowledged receiving SEBI’s notice in a statement to Reuters and stated that the company was “currently reviewing modifications to our Employee Stock Appreciation Rights Scheme.”

The insurer did not provide a timeframe but stated that it will soon resubmit its draft IPO prospectus to SEBI.

The 2017-founded company Digit, which has the financial support of TVS Capital Funds and other investors, aims to grow its general insurance business.