ETtech exclusive: Acko in talks to raise $ 200 million, could become India’s next unicorn

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Bombay: Acko is in talks to raise $ 200 million in a new round of funding that could value the online general insurance startup at $ 1 billion, according to people familiar with the negotiations. A successful deal will propel the startup into a rapidly expanding set of newly created Indian unicorns this year.

People in the know said the Bengaluru-based company is in advanced talks with private equity majors General Atlantic and Multiples Alternate Asset Management, as well as others like Warburg Pincus and TPG, for this latest round. The increased interest of risk investors in the entire FinTech industry, due to greater digital adoption triggered by the ongoing pandemic, is expected to help boost Acko’s valuation.

“The termsheets are coming from a few funds and the (funding) round will be finalized in a month. It will more than double the valuation of the company from $ 400 million in its last round,” an informed person said. discussions.

Last year, Acko raised $ 60 million under the leadership of Munich Re Ventures, the strategic corporate venture capital arm of Munich Reinsurance.

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Chart: Rahul Awasthi / ETtech

In addition to private equity funds, the so-called insurtech company is also in talks with Israeli FinTLV Ventures, a venture capital fund that invests primarily in insurtech and businesses. It is not clear whether existing investors Amazon, Accel, Elevation Capital will also participate in the round.

Emails sent to Acko, General Atlantic, Multiples and FinTLV did not immediately elicit a response. Spokesmen for Warburg Pincus and TPG declined to comment.

Founded in 2016 by Varun Dua and Ruchi Deepak, Acko specializes as a retail auto insurance provider for drivers and transportation services. In 2020, it also diversified its product mix to include health insurance. In addition to its retail insured base, the insurer also offers health coverage to registered sellers of Amazon India in its electronic marketplace.

The startup offers offerings in the product and travel insurance segments where it has ties to taxi aggregator Ola and online retailer Amazon for small-scale insurance coverage available through their respective apps.

Acko’s premium income rose to Rs 145 crore in the March quarter of fiscal 2021 from Rs 94 crore in the period last year, according to company estimates.

While business was hit in the first half of 2020 due to the pandemic, the company’s newly launched healthcare activities grew rapidly due to increased demand for medical coverage amid the spread of Covid- 19.

The startup is expected to exceed $ 150 million to $ 175 million in premiums in fiscal 2022, according to sources close to the company who believe the online insurance provider is unlikely to assess IPO plans in the over the next two years.

New age insurance brands

Acko and Digit, as well as Navi General Insurance, Flipkart co-founder Sachin Bansal, are seen as brands of the new era in the digital foremost insurance industry.

These startups compete with the country’s business-intensive insurance industry, which has relied on the offline mode for years to run its business.

In January, Digit, backed by Canadian billionaire Prem Watsa, became the first unicorn startup of the year. Unicorns are private companies valued at $ 1 billion or more. Digit has raised Rs 135 crore led by existing private equity investors A91 Partners, Faering Capital and TVS Capital, valuing it at $ 1.9 billion.

Unlike peers like Policybazaar and Coverfox, Acko, Digit, and others make their own insurance policies as general insurance companies.

India has a total of 25 general insurance companies, which collectively processed premiums worth Rs 10,822 crore in May.

Acko’s premium income in May was Rs 56 crore, according to the latest IRDAI data, while Digit processed Rs 260.4 crore.

The country’s insurance industry has been under intense stress due to the increased burden of claims due to the pandemic. Health insurance-focused companies have been hit, Acko insiders say the pandemic’s impact on the startup has been mitigated.

Global buzz

“Insurtech,” short for tech-driven insurance startups, has been a buzzword among venture investors globally. In 2020, the booming industry attracted more than $ 7 billion worth of deals globally,
according to a BCG report, making it one of the fastest growing sub-sectors of fintech. This dynamic should increase significantly in 2021.

The only company to have defined the insurance segment online only is the Chinese Zhong An, after which similar platforms have sprung up in the United States, Europe and India. Earlier this month, Berlin-based insurtech start-up
Wefox raised $ 650 million in a round valuing the company at $ 3 billion.

In addition to raising funds at high valuations, young tech insurance companies are also going public in the United States. Last year, Lemonade Inc., backed by SoftBank, went public and currently has a market cap of $ 6.5 billion. Hippo, a Palo Alto-based home insurance tech startup, is considering enrolling by merging with a Special Purpose Acquisition Company (SPAC) for a valuation of $ 5 billion.

In India, in particular, stakeholders are particularly optimistic about the growth prospects of insurance companies, as the country’s insurance penetration is currently one of the lowest in the world, making it an open market. for digital native challenger entities to compete with established companies.

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