General Atlantic doubles down on Acko bet at ‘bargain premium’
Varun Dua founded Acko in 2016. Recently, the startup received a licence to offer life insurance.

General Atlantic doubles down on Acko bet at ‘bargain premium’

Arc Notes

  • The insurtech unicorn is in advanced discussions to raise $120-150 million of fresh funding, with existing investor General Atlantic leading the round.
  • The private-equity firm, which also backs PhonePe and Byju’s, is expected to put in over $50 million and Lightspeed $20 million, two sources inform The Arc.
  • The deal may value Acko at $1.4 billion, a marginal rise from its $1.1-billion worth in October 2021. 
  • It attempted to secure capital from PayU at a $2-billion valuation last year, but the negotiations fell through, The Economic Times had reported.
  • Acko, which recently won a licence to offer life insurance, has spoken with PremjiInvest and other investors about the forthcoming round. There haven’t been new additions yet.

Arc Analysis

After injecting nearly $500 million into payments unicorn PhonePe, private-equity major General Atlantic is increasing its investment in another fintech, Acko. 

General Atlantic had invested $110 million in insurtech Acko’s last round of funding in 2021. It may now give $50-75 million more, depending on the new round’s final size, said people briefed on the matter. 

“This round has been in the works for more than a year. Given the bleak fundraising environment, landing even a slightly higher valuation is a win for Acko,” one of the sources said. 

They revealed that for this round, Acko was still talking to new investors like PremjiInvest, the family office of Wipro billionaire Azim Premji. “There has been an advanced discussion with Premji, but it hasn’t progressed to the closure stage,” the source said. 

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Rivalry Round-Up

Acko, launched by Coverfox’s Varun Dua, began operations in 2016 after receiving a licence for general insurance. Go Digit, founded by Bajaj Allianz veteran Kamesh Goyal, entered the market at the same time.

Both players went after the segment of motor insurance, but there was one key difference. While Go Digit paid more attention to offline distribution, Acko focused on online sales with a direct-to-consumer play. Acko wanted to build the Indian version of Geico, the second-largest auto insurer in the US.

Today, the two Indian businesses have very different scales, as the figures for motor premiums collected show.

  • Acko: Rs 597 crore
  • Go Digit: Rs 3,463 crore, 6X more

The figures are for the 11-month period ending February 2023. They are part of the segment-wise data provided by the GI Council, a representative body of general insurers. 

The valuation of the two companies also shows how wide apart they are. Acko was last valued at $1.1 billion and Go Digit at $4 billion. The latter has filed for a public offering. 

Not Just A ‘Motorhead’

Over the past year, Acko has focused on scaling its health-insurance business, where it has racked up premiums of Rs 630 crore. It has done this by cracking deals with corporates, which runs counter to its D2C approach in motor insurance. 

“They (Acko) have tried getting more group insurance deals, which has helped them grow the (health) business quickly. But group health is not a very lucrative segment as its claim ratio is higher than that of retail health insurance,” said an industry executive. 

He added: “Group health will provide them volumes, which, in turn, may win them more negotiating power with hospitals as they scale up the retail business.” 

Acko’s total premiums collected stood at Rs 1,509 crore for the 12-month period ending March 2023, a 53% growth over the previous financial year.  

“Their objective is to acquire the customer through the group-health business and then offer quality service. They can then cross-sell, either top-ups or health coverage for other family members,” said the source briefed on the new funding round. 

Acko’s next significant play will be in life insurance. It has just received a licence for the same from the industry regulator, IRDAI. 

Most of the money from the new round will go to the health business. Acko will have to capitalise further for the life-insurance push. “The underwriting of health insurance is a precursor to its entry into life insurance,” said another person familiar with discussions inside the company.

This is what is driving investor interest in Acko at the moment. “As a business, insurance will bleed money for eight to nine years. All investors understand that. But their (Acko’s) advantage is that they have the right licences,” said the industry source mentioned earlier. 

Written by Madhav Chanchani

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Mihir Sharma

Gen AI engineering leader

1 年

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