Things to know for prospective investors about IPO of General Insurance Company Nepal Limited; high chance of lottery for 10 units
Fri, Sep 25, 2020 3:40 PM on IPO/FPO News, Company Analysis, Exclusive,
Company Profile:
General Insurance Company Nepal Limited (GICNL) is a general (non-life) insurance providing a wide range of general insurance covers for businesses and individuals. The company started its operation on June 20, 2018. The product diversification includes; Fire, Marine, Motor, Engineering, Miscellaneous, Agriculture, etc. The company is promoted by institutional and individual promoters from diverse backgrounds; Mrs. Babita Kumari Agrawal (9.07%), Mega Bank Nepal Limited (7.14%).
General Insurance is a new player in the non-life industry which has a network of 39 branches (including head office). The company currently has 178 employees and 171 insurance agents as of Mid-January 2020.
The total Paid-Up capital of the company is Rs. 70 crores till the fourth quarter of FY 2076/2077. The company reported a net profit of Rs. 5.06 crores in the same quarter.
About the Issue:
General Insurance Company Nepal Limited (GICNL) is issuing 3,000,000 units of ordinary shares worth Rs. 30 crores to the general public from Ashoj-11, 2077. The early closing date of this IPO issue is on Ashoj-14, 2077. If the issue if not subscribed till Ashoj-11, 2077 then the issue will be extended up to Ashoj-25, 2077.
Out of the total issue offered i.e. 3,000,000 units; 4% issue i.e. 120,000 units have been allotted to the employees of the company and 5% of the total issue i.e. 150,000 units have been allotted to the mutual fund. The remaining 21% i.e. 2,730,000 units are for the general public.
Applications can be placed for a minimum of 10 units and a maximum of 10,000 units. NIBL Ace Capital Limited has been appointed as the issue manager for the IPO issuance.
After the IPO issue, public holding will be 30% and the promoters holding will be 70%.
General Insurance Company Nepal Limited
|
General Insurance Company Nepal Limited |
|||
|---|---|---|---|
|
|
Percentage |
Units |
Amount |
|
Total Capital |
100% |
10,000,000 |
1,000,000,000 |
|
Total Issue |
30% |
3,000,000 |
300,000,000 |
|
Employees |
4% |
120,000 |
12,000,000 |
|
Mutual Fund |
5% |
150,000 |
15,000,000 |
|
General Public |
21% |
2,730,000 |
273,000,000 |
|
Issue Manager |
NIBL Ace Capital Limited |
|
|
|
Issue open date |
Ashwin 11, 2077 |
|
|
|
Issue closing date (earliest) |
Ashwin 14, 2077 |
|
|
|
Issue closing date (latest) |
Ashwin 25, 2077 |
|
|
|
Minimum application |
10 |
|
|
|
Maximum application |
10,000 |
|
|
Care Rating:
Care Ratings Nepal Limited has assigned the „CARE-NP BB+ (Is) ‟ rating to General Insurance Company Nepal Limited (GIC). Issuers with this rating are considered to have a moderate risk of default regarding timely servicing of financial obligations in Nepal.
Capital structure:
|
Capital Structure |
|
|---|---|
|
Authorized capital |
1,000,000,000 |
|
Issued Capital |
700,000,000 |
|
Current paid-up capital |
300,000,000 |
|
Paid-up capital after this IPO |
1,000,000,000 |
Shareholding Structure:
|
Shareholding Structure |
||||
|
|
Number of shares |
Amount |
Percentage |
Remarks |
|---|---|---|---|---|
|
Promoter shareholders |
70,00,000 |
700,000,000 |
70% |
Already Issued |
|
General Public |
30,00,000 |
300,000,000 |
30% |
To be issued |
|
Total |
10,000,000 |
1,000,000,000 |
100% |
- |
Board of Directors:
|
Board of Directors |
||
|---|---|---|
|
S. N |
Name |
Position |
|
1 |
Mr. Kunal Kayal |
Chairman |
|
2 |
Mr. Ram Chandra Khanal |
Director |
|
3 |
Shashi Raj Bajracharya |
Director |
|
4 |
Krishna Bohora |
Director |
|
5 |
Dipendra Agrawal |
Director |
Management Team:
|
Management Team |
||
|---|---|---|
|
S. N |
Name |
Position |
|
1 |
Mr. Mil Barali |
Chief Executive Officer |
|
2 |
Mr. S.K. Tamor |
General Manager |
|
3 |
Mr. Rajesh Prasad Manandhar |
Deputy General Manager |
|
4 |
Mr. Binesh Maskey |
Assistant General Manager |
|
5 |
Mr. Nil Barali |
Assistant General Manager |
Dividend Expectation:
|
Dividend Expectation |
|
|---|---|
|
Year |
Total Dividend |
|
2077/2078 |
5% |
|
2078/2079 |
7% |
|
2079/2080 |
10% |
|
2080/2081 |
15% |
As per the IPO Prospectus, the company has expected to distribute dividends from FY 2077/2078. Since the company has no plan to increase its capital base until FY 2081 (as per the report), the expected dividend for shareholders will be a cash dividend.
Financial Highlights:
|
Particulars |
Actual |
Estimated* |
|||||
|---|---|---|---|---|---|---|---|
|
2074/2075 |
2075/2076 |
2076/2077* |
2077/2078 |
2078/2079 |
2079/2080 |
2080/2081 |
|
|
Total Paid-Up capital ('000) |
700,000.00 |
700,000.00 |
700,000.00 |
1,000,000.00 |
1,000,000.00 |
1,000,000.00 |
1,000,000.00 |
|
Reserve & Surplus ('000) |
8,452.21 |
-16,048.89 |
46,600.00 |
19,276.27 |
38,401.73 |
74,621.60 |
110,036.89 |
|
Contingent Fund ('000) |
1,008.77 |
2,646.84 |
5,200.00 |
12,127.42 |
22,030.23 |
37,165.79 |
57,767.48 |
|
Insurance Fund ('000) |
10,087.73 |
25,798.04 |
51,000.00 |
120,523.77 |
219,551.96 |
370,907.47 |
576,924.46 |
|
Gross Premium ('000) |
3,969.89 |
332,821.38 |
536,900.00 |
1,257,362.29 |
1,562,694.06 |
1,953,694.06 |
2,442,017.58 |
|
Net Premium ('000) |
1,175.07 |
138,069.79 |
209,600.00 |
506,586.90 |
666,973.29 |
833,716.60 |
1,042,145.65 |
|
Claim Payment (Net) |
11,498 |
45,805.02 |
76,900 |
237,265.61 |
237,909.81 |
251,887.26 |
314,851.08 |
|
Investment Income |
42,336.79 |
77,229.50 |
18,000.00 |
157,313.31 |
194,174.18 |
214,799.77 |
222,309.78 |
|
Net Profit ('000) |
22,083.84 |
-7,232.72 |
50,600.00 |
173,795.11 |
198,056.38 |
302,711.01 |
412,033.99 |
|
Net Premium/Gross Premium |
29.60% |
41.48% |
39.04% |
40.29% |
42.68% |
42.67% |
42.68% |
|
Earnings per share (Rs.) |
3.15 |
-1.03 |
7.23 |
17.38 |
19.81 |
30.27 |
41.20 |
|
Net worth per share (Rs.) |
102.75 |
101.76 |
104.02 |
115.15 |
128.00 |
148.27 |
174.47 |
|
Return on Equity (%) |
3.07% |
-1.02% |
6.95% |
15.07% |
154.83% |
20.42% |
23.62% |
(2076/2077* is an unaudited figure)
Conclusion:
Non-life insurance is one of the most intensely competitive industries with 18 companies including General Insurance Company Nepal Limited (GICNL). Out of the total insurance company in the market, General Insurance covers 2.08% (as of FY 2076/2077) market share in terms of Premium collection. This shows that the company is still in a nascent phase and has yet to go a long way to have a strong market position. However, the company with only 2 years of history has already achieved a 2.08% market share which has shown that the management has focused on its expansion plan and the ability to tap into the market and showing the company’s presence.
Also, when we observe the financial projection of the company, the company will be focusing on expanding the customer base of the company which is crucial for the company’s future. However, this will depend on the management’s ability.
So, what is your view on the whole Non-life insurance industry and General Insurance Company Nepal Limited in particular? Will you be applying for the issue of will you pass?
How much to apply?
General Insurance is issuing 3,000,000 units shares where after the allocation of 4% and 5% to staff and mutual fund respectively, 2,730,000 units shares are available to the general public.
If we see the current trend of IPO in the market and Reliance Life Insurance Limited (RLI) in particular which issued its IPO recently, a total of 5,89,464 applicants applied for the issue oversubscribing by 4.04 times and we assume that the same or even more craze prevails in General Insurance Company Limited’s IPO too. Since 10 kitta rule exists for IPO; 273,000 applicants will be lucky enough to get 10 shares of General Insurance Company Nepal Limited.
To sum up, if the same number of applicants (or more) who applied for Reliance Life Insurance’s IPO apply for this issue then there is a high probability of allotment is done through a lottery for 10 units. So, it is advisable to apply 10 units in the IPO issue of General Insurance Company Nepal Limited.
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