Neco Insurance 50% right shares added in SEBON pipeline for approval; receives grade 3 by Icra Nepal

Neco Insurance Company Limited (NIL) has been added in SEBON pipeline to request approval for the issuance of right shares in the ratio 2:1 (50%). NIL is seeking approval to issue 3,920,928.11 right share worth Rs 39.20 crore to its existing shareholders at par value of Rs 100. The issue manager for the right issue is NMB Capital Limited. The insurance company 22^nd  AGM held on Ashwin 10, 2074 had endorsed 10% bonus and 50% right shares to their shareholders. Meanwhile, ICRA Nepal has assigned an “[ICRANP] IPO Grade 3”, indicating average fundamentals to the proposed rights issue amounting NPR 392.09 million of Neco Insurance. As per Icra Nepal, The grading remains constrained by growing dependence on motor segment (~65% of Net premium earned (NPESE) in FY 2017. Incremental underwriting performance of NIL over medium term will depend on the performance of motor segment. The ability of NIL to maintain the underwriting performance, given the sharp increase in scale of operation during past 2 years remains to be seen. Return on net worth of NIL is expected to decrease over the medium term with proposed capital injection. ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. NIL had earned Rs crore in the first quarter of the fiscal year 2073/74. Its paid up capital stand at Rs 71.28 crore and after issuance of 10% bonus and 50% right share its capital will reach Rs 1.17 arba. As per the new guideline, non-life insurance companies should have a minimum paid up capital of Rs 1 arba by the end of FY 2074/75 and NIL will meet the requirement after issuance of  right share.