The Insurance Regulatory and Development Authority of India (IRDAI) has fined IPO-bound Go Digit General Insurance 10m rupees (US$120k) for failing to disclose a significant change in the conversion ratio of compulsorily convertible preference shares (CCPS).
In a press release released Wednesday, the regulator said it had fined Go Digit after it had identified discrepancies in the conversion ratio of CCPS issued by Go Digit Infoworks Services Pvt Ltd to FAL Corporation, a Fairfax Group entity.
The conversion ratio was originally set at 1 CCPS for 2.324 equity shares on 30 May 2017. However, the regulator sent a show-cause notice to the insurer after noticing that this was changed to 2.324 CCPS for each equity share in a joint venture agreement on 11 August 2023.
The Fairfax-backed insurer is in the middle of an IPO process, having received approval from the Securities and Exchange Board of India (SEBI) to raise 11.25bn rupees (US$134.7m) and the insurer said it had corrected the error while preparing for the IPO and made the correct details public in its draft red herring prospectus.
However, despite the insurer’s explanation and corrective measures, the IRDAI, in its order, stated that Go Digit General Insurance had violated the stipulated regulations by not reporting the change in a timely manner. Consequently, the authority directed the insurer to pay the penalty of 10m rupees (US$120k) within 45 days.
The insurer has the option to appeal against the IRDAI’s decision to the Securities Appellate Tribunal, Mumbai, as per the provisions of Section 110 of the Insurance Act, 1938.
