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HDFC Bank on Thursday (August 25) said it will invest in IPO (initial public offering)-bound Go Digit General Insurance’s life insurance business. The country’s largest private sector bank has signed an ‘indicative and non-binding’ term-sheet with Go Digit Life Insurance. 

As part of the deal, the banking major will invest INR 49.9 Cr to INR 69.9 Cr in two tranches in Go Digit Life Insurance for an equity stake of up to 9.94% subject to fulfillment of other terms and conditions. 

“HDFC Bank Limited has entered into an indicative and non-binding term sheet with Go Digit Life Insurance Ltd (Company) which summarizes the principal terms of a proposed investment…of an amount between INR 49.9 crores to INR 69.9 Cr, in two tranches, by subscribing to equity shares of the Company, for an equity stake of up to 9.944%,” HDFC Bank said in a regulatory filing. 

This comes a week after Go Digit General Insurance filed its draft red herring prospectus (DRHP) with the Securities and Exchanges Board of India (SEBI). The Virat Kohli-backed startup is looking to issue fresh equity worth INR 1,250 Cr and will also include an offer for sale (OFS) of 109.45 Mn shares from existing shareholders. 

According to the DRHP, Go Digit Life Insurance is part of the promoter group of Go Digit General Insurance. 

Go Digit Life Insurance proposes to carry out life insurance business in India subject to grant of certificate of registration by Insurance Regulatory and Development Authority of India (IRDAI), the filing said.

Go Digit General Insurance, founded in 2017 by Kamesh Goyal, is a digital full stack insurance company that offers products like health, travel and vehicle insurance. It claims to have served more than 25 Mn customers till the end of financial year 2021-22 (FY22). It has issued more than 7.7 Mn policies till date and had assets worth INR 9.393 Cr under management at the end of FY22. 

It is backed by marquee names such as Canada-based Fairfax, A91 Partners, TVS Capital, Faering Capital, Wellington Hadley Harbor Partners, Sequoia India, among others. The unicorn had last raised INR 121 Cr in a funding round which sent its valuation soaring to $4 Bn.

The insurtech major reported a loss after tax of INR 295.86 Cr in FY22, up 141% from the INR 122.76 Cr in FY21. 

According to Inc42 data, insurtech is expected to emerge as the second biggest sub-sector in the fintech space and is likely to account for 26% or $339 Bn in total addressable market value by 2025.

The growth has largely been attributed to the surge in both life and non-life insurance categories since the pandemic. According to IRDAI data, insurance penetration in India went up to 4.2% in FY21 from 3.76% in FY20.

Go Digit General Insurance primarily competes with players such as ICICI Lombard, Acko, Allied Insurance, among others.