In this week, there were not much noticeable changes in the share market. But, everyone should have noted the drastic change in the price of Everest Insurance Company Limited (EIC). On Poush 23, 2074 the closing price of the stock was Rs 2,399. But when the week ended, the closing price was of Rs 1,971 which was a drop of 17.84%. The company had hit the negative circuit twice on Poush 24 and 25. The company’s proposal for right share at 1:6 is still at SEBON pipeline waiting for approval.
| Year |
Paid up |
Reserve |
Insurance Fund |
Net Premium |
Policies |
EPS |
Net worth per share |
P/E Ratio |
| 74/75 |
12,15,00,000 |
11,93,61,000 |
15,23,37,000 |
2,50,24,000 |
6,883 |
14.76 |
323.62 |
179.49 |
| 73/74 |
10,12,50,000 |
12,13,96,000 |
9,92,65,000 |
2,96,88,000 |
3,902 |
1.04 |
318.09 |
2156.36 |
The table above shows the comparative first quarter report of the years 73/74 and 74/75.
Why did the price of EIC scrip increased previously?
The year has been a roller-coaster ride for the shareholders of EIC. The highest price of the shares had reached to Rs 3,199. The price of the shares had consistently increased at that time. But, the reason for the increase in the price was the same reason for which it is facing such a downward movement; the right shares. The company had proposed right shares in the ratio 1:6 to meet the mandatory requirement of making its paid-up capital at Rs 1 arba. So, the price of EIC had hiked at that time and reached Rs 3,199.
Why has the price decreased now?
There have been a lot of speculations going on in the market regarding such drastic fall in the price. The main reason behind it may be the direction provided by the Insurance Board to change its capital structure. Currently, the capital structure of the company only consists of ordinary shareholders but the board has asked the company to maintain its promoter’s share at 51% as per the provisions provided in its directives of 2066.
The paid-up capital of the company is Rs 12 crore 15 lakhs and with the implementation of the new policies, it is to be increased to Rs 1 arba with 51% as the promoter’s shareholding. For increasing its paid-up capital to Rs 1 arba, the insurance company had applied to the Board for the permission to issue right share in the ratio of 1:6. However, at current capital structure, the company needs to raise almost Rs 12.85 crore to maintain its promoter shareholding at 51%. After this, the capital of the company would be Rs 25 crore. And further, it would need to raise Rs 75 crore to meet the mandatory requirement, for which it can issue right share in the ratio 1:3.
This might be considered as the reason for the huge fall in the price of the share of Everest Insurance Company. Also if the speculation and present market trend are to be considered, there are chances of fall in the price in the coming days as well.
Floor Sheet Analysis (Jan 7-10, 2018):
Here we try to analyze the floor sheet to understand which broker bought the most shares and which broker sold most shares at the falling market price of EIC and also their average buying and selling price.
Everest Insurance: Top 10 Buyer and Top 10 Seller Broker with average buying and Selling Price
