Go Digit General Insurance Faces IRDAI Show Cause Notice Ahead of IPO

• ByStartupStory     |    November 14, 2023

Go Digit General Insurance, a prominent insurance aggregator gearing up for its IPO, has been served a show cause notice by the Insurance Regulatory and Development Authority of India (IRDAI). The notice, along with multiple advisories, relates to certain issues, including the alleged non-disclosure of changes in the conversion ratio of compulsorily convertible preference shares (CCPS).

As per the company’s addendum to its draft prospectus filed with the Securities and Exchange Board of India (SEBI), the show cause notice is directed at the holding company, Go Digit Info Works Services (GDISPL), for purportedly violating the Insurance Act by not disclosing changes in the conversion ratio of CCPS issued to FAL Corporation.

FAL Corporation is owned by Canada-based Fairfax Financial Holdings, holding a 45.3% stake in GDISPL. The remainder is owned by founder Kamesh Goyal and Oben Ventures LLP at 14.96% and 39.79%, respectively. GDISPL, in turn, holds an 83.47% stake in Go Digit General Insurance.

The show cause notice is currently pending, and Go Digit had responded to it on November 6. In the event of an adverse order, the company and its responsible officers could face a maximum penalty of Rs 1 lakh for each day of non-compliance or Rs 1 crore, whichever is lower.

Go Digit General Insurance, which filed its draft IPO documents in August last year to raise Rs 1,250 crore, faced modifications requested by SEBI in January. After making necessary changes, the company resubmitted its IPO papers in April. However, it has received multiple advisories from IRDAI, including issues related to CEO remuneration, disclosures in offer documents, and arrangements for certain services provided by GDISPL.

The company has responded to these advisories, asserting compliance, making necessary refinements in accounting policy, and seeking reconsideration for certain arrangements with GDISPL. The IRDAI has emphasized the need for due care and correct disclosures and advised the company to strengthen its internal controls, aligning them with the size and operations of the firm.

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