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IRDAI imposes Rs 1 crore fine on IPO-bound Go Digit General Insurance

ISN Team
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The Insurance Regulatory and Development Authority of India (IRDAI) has fined Go Digit General Insurance Rs 1 crore for being an IPO-bound insurance startup.

The penalty was imposed for non-disclosure of a significant change in the conversion ratio of compulsorily convertible preference shares (CCPS).

Go Digit's parent company, Go Digit Info Works Services (GDISPL), made the change in favour of FAL Corporation, owned by Fairfax Financial Holdings.

Conversion ratio revision  


Initially, 63,00,000 CCPS were issued to FAL Corporation, with the agreed-upon conversion ratio being "1 CCPS for 2.324 equity shares."

However, the company amended this to "2.324 CCPS for 1 equity share," leading to the issuance of 78,00,000 CCPS by GDISPL.

Despite being reflected in an amendment to the joint venture (JV) agreement and disclosed in the draft red herring prospectus (DRHP) filing, Go Digit did not provide the IRDAI with complete details of the revision, violating Section 26 of the Insurance Act.

Go Digit's response  

In response to the show cause notice issued by IRDAI in November, Go Digit acknowledged that it did not file a copy of the JV agreement amendment with the authority at the time of the change in August 2022.

The company cited inadvertent error and unintentional oversight. They later requested a personal hearing, which was withdrawn, asking IRDAI to adjudicate based on previous responses.

IRDAI findings  

IRDAI observed a significant delay in the submission of JV amendment particulars, stating that the changes in conversion ratio and the total number of CCPS issued were material as they would alter GDISPL's shareholding upon conversion.

The regulator determined that Go Digit violated Section 26 of the Insurance Act and imposed a penalty of Rs 1 crore.

"In view of the facts and circumstances, it is established that the insurer has failed to comply with Section 26 of the Act. Accordingly, in exercise of powers vested with the IRDAI under Section 102 of the Act, a penalty of Rs 1 crore is imposed on the insurer," IRDAI said in its notice.

FAL Corporation, owned by Canada-based Fairfax Financial Holdings, holds a 45.3% stake in GDISPL. Other significant shareholders include Go Digit founder Kamesh Goyal, who owns 14.96%, and Oben Ventures LLP with 39.79%. GDISPL itself holds an 83.47% stake in Go Digit Insurance.