Rastriya Beema Sansthan receives green signal from Finance Ministry to go ahead with proposed capital plan; expected to issue IPO shares for general public

The ministry of Finance has provided initial nod to the Rastriya Beema Sansthan to move ahead with its capital increment plan after the industry regulator has asked all the life insurance companies to increase their paid-up capital to Rs 2 arba by end of Asadh 2075. As a government owned entity, the Beema Sansthan had earlier sought permission from the government to move forward with its capital plan by submitting the same to Ministry of Finance. As per the capital plan outlined by the government owned company, it has proposed to raise the stake of the current shareholders to 70% and float remaining 30% shares as IPO to general public; thereby meeting the regulatory mandated figure of Rs 2 arba. However, the proposal has also to be ratified by the government before the IPO could be floated in the market. On the other hand, if the government decides to give continuity to the Bima Sansthan as government entity, then it will have to rack up investment from the current investors. Currently, Nepal government has a stake of 27.78%, 55.55% stake of Nepal Rastra Bank and 16.67% stake of Nepal Bank in this entity. It currently has a paid up capital of Rs 18.10 crore which is sort of further Rs 1.82 arba to meet the requirement of the regulator. It has Rs 16.23 crore in its reserve while Rs 14.49 arba in its Life insurance fund. Apart from the government, other promoting companies are also required to provide their consent for the proposed capital plan. As per the existing Insurance Act, all the insurance companies are required to maintain a minimum public share holding of 30% which can be extended to maximum of 49%. Following such a provision in the Insurance Act, the government can be expected to instruct the government owned insurance company to dilute the promoter share holding by inducting public share holders through issuance of IPO shares in coming days.