300% right shares of Everest Insurance opens from tomorrow; All necessary information to make sound judgement

Company profile

Everest Insurance Company Limited (EIC) is a general (non-life) insurance company that started its operation from Shrawan 07, 2051. It’s registered head office is located at Kathmandu 01, Hattisar. EIC has its total shareholding as General Public without any promoter shares, however after the issuance of 105% (1:1.05) right shares as promotor shares, EIC now has promoter holding too.

The company is going through Phase II by issuing 300% right shares in order to meet the regulatory requirement of Rs 1 arba paid-up capital.

Insurance Board (IB) of Nepal has halted fire insurance business of EIC from August 2012 and took over BoD and management under its control from September 9, 2013, due to financial irregularities happened in EIC. These events resulted in closure of many branch offices, large scale turnover of staffs and loss of market share. IB has handed over the BoD and management to the newly elected BoD and also lifted the ban on fire insurance from February 17, 2014.  EIC has network of 23 branches (including head office) and 86 insurance agents as on Mid-April 2018. During 9MFY18, EIC has reopened three branches and opened 11 new branches. EIC have assets base of Rs.865 Million as on July 15, 2017 which has increased to Rs.1,039 Million as on April 13, 2018.  (taken from CARE Nepal report)

Objective of the issue

The primary objective of the issue is to meet the minimum capital mark mandated by the Beema Samiti. Nonetheless, the capital generated thereby will be used in following manner:

About the issue

Everest Insurance Company Limited (EIC) will be issuing 82,19,475 units right shares (1:3) ratio to its existing shareholders from Jestha 14, 2076. The last day for this right issue is on Asad 16, 2076.

The book closure date for right share purpose was on Baisakh 9, 2076. Investors holding shares of the company till Baisakh 8 are eligible for right shares.

The insurance company is issuing right shares in the ratio of 1:3 or 300% at par value. The company will be issuing 82,19,475 units as right shares to raise a capital worth Rs 82.19 crore.

Siddhartha Capital Limited has been appointed as the issue manager.

The company had recently issued 105% right shares, which has been listed in NEPSE. The existing paid up capital of EIC is Rs 27.39 crore. Then, after the adjustment of 300% right shares proposed now the capital will reach Rs 1.09 arba.

Capital structure

Shareholding composition

Primary shareholders

There are 5,372 promoter shareholders in total. The primary shareholders are:

Board of directors

Management Team

The company is being headed by Kamal Gautam as the CEO.

Credit Rating

CRNL has assigned grading of “CARE-NP IPO Grade 4” to the proposed Rights Share Issue of Everest Insurance Company Limited (EIC). Rating indicates Below Average Fundamentals.  The proposed Rights share issue will be in two Phases; Phase I proposes 105% right shares issue of 1.403325 Million number of equity shares aggregating Rs.140.3325 million and Phase II proposes 300% right shares issue of 8.219475 Million number of equity shares aggregating Rs.821.9475 million. The phase one is already completed.

Key Grading Weaknesses

  • Volatile net underwriting profit & net profit over the period impacting the combined ratio
  • Low premium retention ratio
  • Investment is not made as directed by Insurance Board in the past
  • Concentration in motor segment
  • Competition from other insurance companies and relatively small market share in the nonlife insurance industry

Key Grading Strength

  • Long track record and strong shareholder group
  • Experienced board and management team
  • Improved overall performance during 9MFY18 (UA)
  • Improvement in the investment income over the last 2 years albeit lower base
  • Moderate solvency ratio

Source: CARE Nepal

Financials

Source: Company prospectus and CARE Nepal Rating Report