Digit Insurance to refile preliminary papers due to compliance issues

The market regulator Securities and Exchange board of India (SEBI) has turned down the draft red-herring prospectus (DRHP) filed by tech insurance unicorn Digit Insurance for its initial public offering due to compliance issues in a private letter.

In the letter the SEBI has mentioned that the company has not complied with the regulations by issuing so-called Stock Appreciation Rights to employees. This is the second setback for the company’s listing goal. As in September 2022, the market regulator has froze Digit’s proposal due to some compliance issue. 

Stock appreciation rights enable employees to earn a bonus equal to the appreciation in value of the company’s stock over a period of time. SEBI bans the grant of such employee options for companies which are looking to go public.

The Mumbai-based startup is now looking to refile the documents for its $440 million (Rs 3585 crore) IPO, as per the reports of Reuters. It also cited that the IPO plan of the company will be on hold until it changes stock appreciation rights to employees stock option plans (ESOPs) and refile the draft papers with SEBI.

The company is currently evaluating the amendments to its employee stock appreciation rights scheme and will file prospectus in the due course. 

Founded in the year 2017, Digit Insurance provides general insurance services and is backed by investors such as Canadian billionaire Prem Watsa, and Indian investment firm TVS Capital Funds among others.