Prudential Insurance issuing 60% right shares till Chaitra 23; Find out essential information about the company

Prudential...

Company profile

Established in November 2000, Prudential Insurance Company Limited (PICL) is the 13th private sector general insurer in Nepal. PICL is a medium-sized company with ~5% market share in terms of the General Insurance Industry’s Gross Premium Written in 2018-19. Currently, PICL is in operation with 40 branches spread across the nation for procuring business and extending after sales services. 

The paid-up capital and the net worth of the company as of mid-July 2019 is ~NPR 642 million and NPR 1,339 million respectively. PICL has 80:20 promoter-public shareholding ratios. Major shareholders as on mid-July 2019 include Mr. Birendra Kumar Sanghai (6.50%), United Distributors Nepal P. Ltd (4.50%), Mr. Shrawan Kumar Agarwal (4%), Sumit Kumar Agarwal (4%), RMC Investment Pvt Ltd. (4%) and Mr. Rohit Gupta (4%), among others. 

PICL reported a profit after tax of NPR ~132 million during FY2019 (NPR 159 million in FY2018) over an asset base of NPR 2,431 million as of mid-July 2019 (NPR 2,137 million in mid-July 2018).

Objective of the issue

About the issue

Prudential Insurance Company Limited (PICL) is issuing 60% right shares from (Falgun 18, 2076). The issue will be open till Chaitra 23, 2076 till banking hours.

The non-life insurance company had proposed issue of 3,849,120 units of shares as 60% right shares worth Rs.38.49 Crore at par value of Rs.100 per share for the existing shareholders of the company. For this purpose, the books closure date was on Magh 27, 2076.

NMB Capital has been appointed as the issue manager for the issue.

ICRA Nepal has assigned [ICRANP] IPO Grade 4+, indicating below-average fundamentals to the proposed rights issue amounting to ~NPR 385 million of Prudential Insurance Company Limited (PICL).

The current paid up capital of the company stands at Rs.64.15 Crore. After the adjustment of 60% right share, the paid up capital will increase to Rs.1.02 Arba.

Capital structure

Shareholding composition

Board of directors

Management Team

Credit Rating

ICRA Nepal has assigned [ICRANP] IPO Grade 4+, indicating below average fundamentals to the proposed rights issue amounting to ~NPR 385 million of Prudential Insurance Company Limited (PICL). PICL has proposed a 60% rights issue of 3,849,120 numbers of equity shares of face value NPR 100 each, to be issued to the existing shareholders at par. The proposed rights issue is being made to comply with the revised minimum paid up capital requirement for general insurers[1] as prescribed by the Insurance Board of Nepal. 

Strengths

  • Adequate track record in the industry (operating since 2002) and its experienced board and management team.
  • Adequate reinsurance arrangements, including catastrophic provisions and good profile of the lead reinsurer, which provides comfort to its claims-paying ability and its ability to maintain solvency during catastrophic events like the April 2015 earthquake.
  • Improved investment outlook for PICL, given the hardening of the interest rate across the banking sector deposits, wherein a major portion of its investment portfolio is concentrated.

Weaknesses

  • Decline in market share over the last two to three years (~5% of industry GPW in FY2019 down from ~7% in FY2017).
  • Moderate underwriting performance characterized by a high claims ratio on a sustained basis.
  • Premium growth rate has lagged behind the industry average for the last two to three years, affecting its scale of operations vis-à-vis the industry peers.
  • A slower growth in premium, coupled with a high claims ratio and high management expense ratio has lowered the underwriting surplus of the company in the last two to three years.
  • Incremental growth and the return prospect of PICL are likely to be determined by its ability to grow the customer base, premium earnings and scale up the business.
  • Slow growth in premium earnings vis-à-vis industry average on a sustained basis during the last two to three years has eroded the market share of PICL. As of now, PICL is a medium-sized player with ~5% GPW share (FY2019) in the Nepalese general insurance industry.

Source: https://www.icranepal.com/

Financials

Source: Company prospectus and ICRA Nepal Rating Report