15 non-life insurance companies listed, only 4 meeting the capital standard; Remaining companies yet to raise a total of Rs 3.3 arba
Wed, Jan 30, 2019 1:56 PM on Dividend, Bonus & Rights, Exclusive, Stock Market,
Currently, there are 15 listed non-life insurance companies in NEPSE. Like the life insurance sector, their minimum paid-up capital requirement was also increased to Rs 1 arba and the time frame to achieve that was till the end of FY 2074/75.
We are in the second quarter of FY 2075/76 and only 4 out of 15 have met the minimum required capital. The list of the non-life insurance companies and their paid-up capital status is shown below:
The capital was to be met by the end of Ashad 2075, but as it happens none of the companies have yet endorsed bonus and right shares nor have they announced the date for Annual General Meeting (AGM).
However, based on the capital plans they had submitted to the Beema Samiti and their previous commitment, we can expect following issues to happen soon and thereby, their impact on the market price of each scrip is presented below:
SICL, HGI, PRIN and NIL have already met their capital, so there market prices won't be adjusted.
NICL and EIC will be able to meet the capital requirement after the issues that are in pipeline. NICL's 65% right shares has already been approved by SEBON and will soon be issued. After the issue, the current LTP of Rs. 570 will be adjusted down to Rs 385.
Similarly, EIC's 105% right shares had already been issued but as it was not fully subscribed, the unsold units are in auction. Post the auction, the company has also endorsed 300% right shares. Hence after both 300% right shares are allotted and adjusted, they will easily meet the required standard of paid-up capital. Post the adjustment, the LTP of Rs 845 will fall to Rs 286.
SIl and LGIL will have to issue 15.98% and 13.64% bonus respectively to meet the minimum requirement and since the amount isn't very high they will be able to do so. Post the bonus, the market price of SIL will be Rs 564 and of LGIL will be Rs 480.
IGI is currently issuing 80% right shares and after it's allotment, it will be short by only Rs 2.8 crore, which they can meet by issuing bonus of 3% for FY 2074/75. Thus, after adjustment, their LTP will stand at Rs 438.
PICL's current LTP stands at Rs 718 and has to raise Rs 35.85 crore to meet Rs 1 arba capital mark. As per its capital plan, it'll now have to issue 40% right shares and 12% bonus shares. The 40% right was to be issued in FY 2073/74 as per the plan, but it didn't. So the company is likely to issue 40% right along with 12% bonus in the AGM of 2074/75.
Similarly, NLG also need to issue 40% right and 20% bonus as per its capital plan to meet the Rs 1 arba paid-up capital requirement. Post the issue, its LTP will stand at Rs 546.
In case of PIC, they had issued FPO for 6.59 lakh units at Rs 799, which contributed to their reserve by huge amount. Currently, their paid up capital stands at Rs 58.4 crore, whereas the reserves and surplus stands at Rs 67.1 crore. So, they are capable of issuing bonus of 71.23% to meet the capital mark.
SIC, on the other hand is also capable of issuing dividend of 85%. SIC hadn't issued dividend for FY 2073/74 and the AGM and dividend for FY 2074/75 is also pending. Currently, it reserves stands at Rs 55.7 crore with capital of Rs 53.8 crore. So, once they issue bonus of 85.7%, their market price will be adjusted to RS 710 from Rs 1,319.
UIC needs to raise Rs 69.8 crore to meet the capital mark. It had announced 240% right from the meeting of board, but had not been raised in AGM of 73/74 FY for some unknown reason. However, if UIC is to meet the requirement, it’ll have to propose 240% right. Post the right issue, it's market price will be adjusted to Rs 302.
Finally, RBCL with the lowest paid-up capital right now will have to issue 275.04% bonus to raise the paid-up capital to Rs 1 arba. This company hasn't conducted its AGM since FY 2067/68. Even without AGM for 7 years, it's market price stand at the top with Rs 9,415 due to its reserve strength. It's reserve stands at Rs 2.09 arba which is higher than the required paid-up capital itself. So, once it distributes 275.04% bonus it's market price will be adjusted down to Rs 2,510.
Disclaimer: This study is done just to see the effect on the secondary market price of each non-life insurance companies after they meet the minimum requirement of Rs 1 arba. Mentioned right and bonus share is based on assumptions. Any decision taken on the basis of this research is solely responsibility of the investors itself.
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