Prem Watsa, Chairman and Chief Executive Officer, Fairfax
Fairfax currently owns 45. 3% in Go Digi Infoworks, which has 83% stake in the Go Digit General Insurance company.
In June 2022, Digit Insurance and Fairfax had applied to the IRDAI for approval to convert the latters’s holdings in compulsory convertible preferred shares issued by Go Digit Infoworks (“Digit CCPS”) into equity shares of Go Digit Infoworks (“Digit”)
IRDAI said the application cannot be considered in its current form as conversion of the Digit CCPS would result in Digit (currently classified as an Indian promoter of Digit Insurance) becoming a subsidiary of the company, which is currently prohibited for Indian promoters, notwithstanding that the foreign direct investment rules have been amended to allow foreign investors to own up to 74 per cent in an Indian insurance company
Toronto:
The Indian insurance regulator IRDAI has disallowed a move by Fairfax, owned by Indian origin Canadian billionaire Prem Watsa, that would have led the Toronto based company to increase its stake to 74 per cent (from 49 per cent) in its existing Indian insurance joint venture Go Digit General Insurance, which does general insurance business in India.
The deal would have made a Fairfax richer by approximately $375 million, according to the company.
In June 2022, Digit Insurance and Fairfax had applied to the IRDAI for approval to convert the latters’s holdings of Go Digit Infoworks’s compulsory convertible preferred shares (“Digit CCPS”) into equity shares of the same company , said Fairfax.
Pune based Go Digit Infoworks Services Pvt. is the parent company of Go Digit Insurance, Fairfax currently owns 45.3 per cent of Go Digi Infoworks, which has a 83 per cent stake in Go Digit General Insurance.
However, IRDAI didn’t allow the deal as it would violate the current insurance regulations.
Fairfax in a statement on Thursday has said “The IRDAI has communicated that the application cannot be considered in its current form as conversion of the Digit CCPS would result in Go Digit Infoworks (currently classified as an Indian promoter of Digit Insurance) becoming a subsidiary of the company, which is currently prohibited for Indian promoters, notwithstanding that the foreign direct investment rules have been amended to allow foreign investors to own up to 74 per cent in an Indian insurance company.’’
However, Digit, Digit Insurance and Fairfax intend to continue to explore all avenues under applicable law to achieve the company’s(Fairfax) majority ownership of Digit through conversion of the company’s Digit CCPS, and the company expects to report a gain of approximately $375 million when it achieves majority ownership of Digit, said Fairfax.
After rejecting Fairfax’s application for converting its holding (Digit CCPS) into equity shares of Go Digit Infoworks, the IRDAI is now planning further to tighten rules on how a holding company can invest in its Indian insurance subsidiary.
The IRDA has now proposed that in case an insurance company is promoted by a Special Purpose Vehicle(SPV) or an Non-operative Financial Holding Company (NOFHC), they can’t issue convertible instruments of any kind and no stock options / sweat equity can be issued to the employees/directors of SPV/NOFHC.
Go Digit Insurance is a four-year old joint venture among a few Indian partners including Fairfax and Kamesh Goyal, a former senior functionary of Allianz.
The partners, after setting up a general insurance company, have now applied for licenses to the IRDAI for a life insurance joint venture and a reinsurance venture in India.
Go Digit’s application, seeking approvals of capital market regulator Sebi for a Rs 1,250 crore IPO, is currently pending with the capital market regulator.