IPO Bound Bengaluru-based general insurer Go Digit has received a show-cause notice and multiple warnings from the Insurance Regulatory and Development Authority of India (IRDAI), the company said in a new addendum to its draft prospectus filed with the Securities And Exchange Board. of India (SEBI).
The show cause notice was for non-disclosure of change in the conversion ratio of the compulsorily convertible preference shares (CCPS) issued by Go Digit Info works Services (GDISPL), the parent of Go Digit General Insurance, to FAL Corporation.
“According to the Notice, the change in the conversion ratio of 6,300,000 CCPS issued by GDISPL to FAL Corporation, from ‘1 CCPS for 2,324 equity shares’ to “2,324 CCPS for each equity share”, which was reflected by an amendment to the JV- Agreement dated August 11, 2022, is a material change to the information provided at the time of application for registration with the IRDAI,” the company’s regulatory disclosure to SEBI said.
FAL Corporation is owned by Canada-based Fairfax Financial Holdings, which owns 45.3% of GDISPL while the rest is owned by founder Kamesh Goyal and Oben Ventures LLP at 14.96% and 39.79%, respectively. GDISPL further has 83.47% stake in Go Digit General Insurance.
The development comes at a time when the company’s IPO is yet to receive final approval from the SEBI even after Go Digit refiled its draft red herring prospectus (DRHP) addressing the market regulator’s concern.
According to the notice, Go Digit was expected to give the details of such a change to the IRDAI but it did not provide the “full details”. Therefore, IRDAI also claimed that the startup is violating Section 26 of the Insurance Act.
“In a case against our company and the officers of our company responsible for the non-compliance of Section 26 of the Insurance Act an adverse order is made, the maximum penalty that can be imposed on them is a fine of Rs 1 lakh for each day. during which such failure continues, or Rs 1 crore, whichever is lower,” read the addendum.
Multiple Tips
Go Digit General Insurance filed draft documents for its IPO in August last year to raise Rs 1,250 crore from a new issue of shares and an offer for the sale of 109.4 million equity shares.
In January, the IPO papers were returned by the SEBI. The company refiled its IPO paperwork in April after making changes to its employee share appreciation rights scheme. In response to the returned DRHP, the insurtech company received multiple advisories from IRDAI.
The multiple tips include failure to take approval for change in remuneration of the CEO due to change in ESAR 2018 (employee rights evaluation scheme) to ESOP 2018 (employee share option plans) and failure to inform IRDAI about retrospective grant of ESAR- oh before the date of issue of certificate of registration.
IRDAI also advised the company to ensure due diligence in making disclosures in the bid documents to reflect the correct position on the commission’s long-term policies; discontinuation of the arrangement of fee charged by GDISPL for certain facility management services and technology services rendered to the company and strengthening of internal controls commensurate with the size and operations of the company.
Go Digit responded to the notice on November 6, and the matter is currently pending.
The said was not a change in the economic benefit obtaining from the change, adding that it set up necessary internal controls to seek necessary approvals, in case of change in any component of the remuneration of the C