Axis Bank would acquire around 10% of Go Digit Insurance

The Go Digit General Insurance IPO may be in trouble but that has not stopped Axis bank from buying a stake in the cloud based insurer. It may be recollected that last week SEBI had put the Go Digit IPO in abeyance. An IPO in abeyance is not any statement about the quality of the IPO, but indicates that either the company or its group companies may currently be under some form of regulatory investigation. The abeyance would be removed once this issue is satisfactorily resolved. 

Axis Bank signed a non-binding term sheet with Go Digit Insurance, to invest up to Rs69.90 crore in the company, which would be made in 2 tranches. Overall, Axis Bank will be taking a 9.94% stake in Go Digit Insurance. Incidentally, Go Digit has a rather marquee star cast. It is backed by Virat Kohli and Anushka Sharma. The other major investor in the venture is Fairfax of Canada, owned by Prem Watsa. The founder of Go Digit is Kamlesh Goyal, who was formerly the CEO of Bajaj Allianz Insurance and also worked with Allianz Germany, bring a very rich repertory of experience in insurance with him.

Axis is not the only bank to evince interest in Go Digit Insurance. In August, HDFC Bank had also announced the purchase of a 9.94% stake in Go Digit, approximate for similar valuations as Axis Bank. This interest level is a manifestation of the potential of the insurance industry in India, considering its low levels of penetration. For now, the IPO of the company may be in abeyance but market experts believe that this may not be a serious issue and the approvals should come trough sooner rather than later.

The closer association between digital insurance companies and banks is a sort of match made in heaven. Small companies like Go Digit Insurance need the support of large banks with their bancassurance networks and their much stronger balance sheet. Banks like HDFC Bank and Axis Bank already have a bancassurance model running to sell insurance. However, Go Digit has the advantage of being fully online and largely driven by cloud based infrastructure. It would be a smart fintech combination in an uncertain financial world.