ICRA Nepal assigns Grade 4+ to the proposed 50% right issue of Prabhu Insurance

ICRA Nepal has assigned “[ICRANP] IPO Grade 4+” grade to the upcoming 50% right issue of Prabhu Insurance Limited (PRIN), indicating below average fundamentals. PRIN is seeking to issue 1,925,078.81 units right shares worth Rs 19.25 crore in the ratio 100:50 to be floated at a par value of Rs 100 per share. As per ICRA Nepal, the grading has considered a long track record and brand name of several ventures under Prabhu Group. The grading has also been strengthened by the presence of Employees Provident Fund as a strong promoter group with 15% shareholding in the insurance company. Improvement in underwriting performance with increase in income from premium and decline in commission expenses has also affected the grading positively. However, the grading was constrained because of its weak competitive position among other general insurance companies. PRIN’s growth in premium is only 9% versus the industry average of 21%. Despite having 19 branches, majority of premium earnings are attributed to institutional clients—reflecting weak presence among retail sectors. According to ICRA Nepal, the grading is also limited by declining yield on investment portfolio which could affect incremental returns. ICRA Nepal assigns grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. For the grading categories 2, 3 and 4, the sign of + (plus) appended to the grading symbols indicate their relative positioning within the grading categories concerned. Thus, the grading of 2+, 3+ and 4+ are one notch higher than 2, 3, and 4 respectively. Prabhu Insurance has earned Rs 2.97 crore in the second quarter of the FY 2073/74. Its net earnings from premium has increased to Rs 22.25 crore up to the second quarter, an increment of only 3.5% as compared to the corresponding quarter last year. It had distributed 17% bonus share to its shareholders this year. After the issuance of 50% right, its paid up capital will reach Rs 57.75 crore.