Digit Insurance, backed by Canadian billionaire Prem Watsa, has filed draft documents for an initial public offering (IPO). According to the filing, the company is seeking to raise Rs 1,250 crore by issuing new shares and has offered to sell 10.94 crore equity shares for an undisclosed amount.

However, the media reported that the total size of the IPO could be around Rs 5,000 crore.

Digit offers auto, health, travel, fire and other microinsurance. Auto insurance accounts for more than half of the startup’s total premiums. The startup is the first unicorn in 2021, a year with 44 companies valued at $1 billion or more.

A Draft Red Herring Prospectus (DRHP) filed with the Securities and Exchange Board of India said the company might sell around Rs 250 crore of shares in a pre-IPO placement, and if that happens, the size of the offering will be reduced.

ICICI Securities, Morgan Stanley India Co, Axis Capital, Edelweiss Financial Services, HDFC Bank and IIFL Securities will manage the issue.

Funds raised from this offering will increase the capital base, expand the business and improve solvency, thereby increasing solvency.

Under insurance law, companies must maintain a solvency ratio of at least 1.5 times. Its solvency ratio stood at 2.01x as of March 31, 2022.

According to DRHP, the shareholders who sold the shares through the tender offer included promoter entity Go Digit Infoworks Services Private Limited, which holds approximately 83.65% of the shares of startup Nikita Mihir Vakharia, which is affiliated with Mihir Atul Vakharia, Nikunj Hirendra Shah and Sohag Hirendra Shah with Subramaniam Vasudevan and Shanti Subramaniam.

The sale offer includes up to 12.55% of Go Digit shares, up to 4,000 shares of Vakharia, up to 3,778 shares of Nikunj Hirendra Shah and up to 3,000 shares of Subramaniam Vasudevan. Go Digit’s shareholders include Chairman and Founder Kamesh Goyal, Goyal’s Oben Ventures and FAL Corporation, part of Watsa Fairfax Holdings.

The company’s net loss widened to Rs 295.86 crore in FY 2222 from Rs 122.76 crore in the previous year.

Total assets under management in FY22 rose 68% to Rs 9,393.88 crore from Rs 5,590.10 crore a year ago. The total premium was Rs 5,267.63 crore, up from Rs 3,243.39 crore.

In an interaction with Moneycontrol on July 25, chairman and founder Kamesh Goyal said that Digit Insurance would assess the timing of its IPO based on market conditions five years after the company launched in October.

Regulations by the Insurance Regulatory and Development Authority of India (IRDAI) do not allow promoters to sell shares for five years ago.

Fairfax has several investments in India, including Bangalore International Airport, IIFL Corporation, Catholic Syrian Bank, National Stock Exchange (NSE) and Thomas Cook India. Digital insurance is its only venture.

The startup has also applied to IRDAI for a license to set up life insurance and reinsurance entities, which will operate separately.

Goyal has said the two companies would have to raise capital separately and have their management teams.

The company is valued at $3.5 billion and will raise $284 million in 2021. Apart from Fairfax Holdings, the company has Sequoia Capital India, A91 Partners, Faering Capital, TVS Capital and cricketer Virat Kohli as its investors.