Watsa-backed Digit raises $84m from domestic PEs

MUMBAI: Digit Insurance has raised $84 million (Rs 596 crore) from domestic private equity funds A91 Partners, Faering Capital and TVS Capital, valuing the startup backed by Canadian billionaire Prem Watsa at around $870 million. This is a huge bump up from the Bengaluru-based general insurer’s valuation of around $350 million when it last raised capital in 2018.

The newly infused equity capital will be used primarily for meeting the Insurance Regulatory and Development Authority of India’s (IRDAI) guidelines on regulatory capital and foreign exposure, Digit founder and chairman Kamesh Goyal told ET.

This is the first external round of funding for the three-year-old company which was launched by insurance industry veteran Goyal in 2017, along with Watsa’s Fairfax Holdings.


In its previous rounds of internal capital infusion, Goyal and Fairfax had invested slightly over $140 million. “This round we have more external investors which will help us bring the holding company’s stake down, in line with the government’s foreign direct investment norm,” Goyal said. Indian laws limit foreign holding of insurance companies to 49%. The latest capital-raising exercise gives a roughly 10% combined stake to the three new domestic private equity investors. The rest of the stake is held between Fairfax subsidiary Digit Infowork and Watsa’s Fairfax. Additionally, the company management holds roughly 0.6% of shares under employee stock option schemes at the new valuation.

“The capital will primarily be used to shore up the solvency ratio,” Goyal said.

Under IRDAI rules, both life and non-life insurers need to have a minimum solvency ratio of 150%. The solvency margin is the amount by which an insurer’s assets exceed its liability. It is a mandatory requirement for insurers to protect policyholders in adverse scenarios.