Domestic brokerage firm Emkay Global Financial Services has initiated its report on Go Digit General Insurance Ltd, just after a day of its listing on the bourses on Thursday. The brokerage firm anticipates a sharp correction in the latest debutant of Dalal Street as it sees the company as another insurance player, demanding extraordinary valuations.
Emkay sees no clear competitive advantage for Go Digit over Indian general insurance (GI) players that acquire a business largely via intermediaries and focus on motor and commercial lines, and one that does not have a clear moat. It has been unable to convert digital superiority into a sustainable competitive advantage and the business model is undifferentiated from the competition, it said.
Shares of Go Digit made a muted Dalal Street debut on Thursday as the stock was listed at Rs 286 on its maiden trading session, at a premium of just 5 per cent over its issue price of Rs 272 apiece. However, the stock settled at Rs 305.75 in its first trading session with a total gain of 12.40 per cent for the day.
Go Digit’s operating performance has improved fairly well over the last five years, driven by material improvement in opex ratio led by economies of scale and improvement in claims ratio, it said. "Going ahead, we see external tailwinds waning and Go Digit finding it difficult to drive growth once it starts focusing on reducing payouts to intermediaries for improving profitability," it said.
With only 6 years into operations, Go Digit has seen significantly high growth on a smaller base; the period also witnessed sigma events such as Covid-19 that had a bearing (positive or negative) on different segments of the GI business, said the report.
"Against this backdrop, Go Digit’s is still an evolving business; currently valued at FY26E P/E of 49.6 times and P/B of 5.9 times, the stock is expensive versus listed peers with an established business model and stronger retail franchise," added Emkay Global, while initiating coverage on Go Digit with a 'sell' rating with a target price of Rs 210 on the stock, suggesting a 30 per cent fall in it.
To recall, the IPO of Go Digit General Insurance was open for bidding between May 15 and May 17. The new-age insurance player raised a total of Rs 2,614.65 crore via its primary stake sale, which was overall subscribed 9.6 times by the end of three-day bidding process.