MUMBAI, Jan 31 (Reuters) – Digit Insurance will re-file for its $440 million initial public offering (IPO), the company told Reuters on Tuesday after India’s market regulator issued a private letter identifying certain compliance issues with share plans for employees.
It’s the second setback of its kind for Digit’s listing ambitions. The company, which was last valued at $3.5 billion by Sequoia Capital, provides general insurance services and is backed by investors including Canadian billionaire Prem Watsa.
In September, the market regulator froze Digit’s IPO proposal over certain compliance issues related to the issuance of shares, but later resumed the review.
In a Jan. 30 letter from the Securities and Exchange Board of India (SEBI), seen by Reuters, the regulator said it would return Digit’s IPO securities because the company failed to comply with regulations by issuing so-called stock appreciation rights issued to employees.
Such rights allow an employee to receive a bonus equal to the increase in the company’s share price over a period of time – which Indian regulations prohibit for companies going public.
According to SEBI’s letter, which is non-public and not previously reported, Digit was found “unfit to make a public offer.”
The company’s IPO is on hold until it converts its employee stock rights into stock option plans and refils papers with the regulator, said two people with direct knowledge of the matter who were not authorized to speak publicly.
Digit confirmed in a statement to Reuters that it received the letter from SEBI, adding that they are “currently evaluating changes to their employee stock appreciation program.”
The insurer said it would resubmit its draft IPO prospectus to SEBI in due course, but gave no timeline.
SEBI did not respond to a request for comment.
Founded in 2017 and backed by Indian investment firm TVS Capital Funds, among others, Digit is trying to expand into property insurance.
Separately, the company is entering the life insurance market with its Go Digit Life venture.
reporting by M. Sriram; Edited by Aditya Kalra and Jamie Freed
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