IRDAI Imposes INR 1 Cr Penalty On IPO-Bound Go Digit

SUMMARY

Go Digit is charged with a penalty for non-disclosure of a change in the conversion ratio of compulsorily convertible preference shares (CCPS)

IRDA has instructed the insurance firm to deposit this penalty amount within 45 days of the order

The regulator had previously issued a show cause notice to the firm regarding the matter

The Insurance Regulatory and Development Authority of India (IRDAI) has imposed a penalty of INR 1 Cr on IPO-bound Go Digit General Insurance for non-disclosure of a change in the conversion ratio of compulsorily convertible preference shares (CCPS).

IRDA has instructed the insurance firm to deposit this penalty amount within 45 days of the order and charge it to its shareholders’ account.

The regulator had previously issued a show cause notice to the firm regarding the matter, involving the issuance of about 63,00,000 compulsorily convertible preference shares (CCPS) by Go Digit’s parent company Go Digit Info Works Services (GDISPL) to Fairfax Group-owned FAL Corporation.

During the 2017 joint venture (JV), the agreed-upon conversion ratio was “1 CCPS for 2.324 equity shares,” but the company altered it to “2.324 CCPS for 1 equity share.”

“There has been an inordinate delay in filing the particulars of the JV Amendment Agreement, which includes details such as the change in conversion ratio and the total number of CCPS, now at 78,00,000 instead of the authorised 63,00,000 CCPS as per the order dated May 2, 2024,” the IRDAI notice added.

Despite Go Digit’s amendment to the JV agreement dated August 11, 2023, and its disclosure in the DHRP filing, the regulator said that the company failed to provide complete details of the revision, thus violating Section 26 of the Insurance Act.

The company said that the numbers were interchanged purely owing to inadvertence.

The company received final approval for a public listing from SEBI on March 5, 2024, after refiling its draft red herring prospectus (DRHP) addressing certain concerns that the market regulator had raised earlier.

FAL Corporation is a part of Canada-based Fairfax Financial Holdings, which is one of the major investors in Go Digit. FAL Corporation holds a 45.3% stake in GDISPL, while founder Kamesh Goyal and Oben Ventures LLP own 14.96% and 39.79%, respectively. Additionally, GDISPL holds an 83.47% stake in Digit Insurance.