Things to know for prospective investors about IPO of Ajod Insurance Limited; advisable to apply only 10 units

Things to...

AJOD Insurance Limited (AIL) is a general (non-life) insurance company licensed by the Insurance Board of Nepal (Beema Samiti) in 2064 B.S as a public limited company and officially started its operation from 21st Ashad 2075. It is headquartered at Sundhara-11, Kathmandu. The company has been offering a wide range of general insurance coverage, to name a few, Motor, Engineering, Fire, Agriculture, Aviation, Marine, etc. for businesses and individuals. The company currently has a network of 38 branches.

The total Gross Premium collected by AJOD Insurance Limited as of Chaitra end, 2076 stands at Rs. 415 Mn and a Net Premium of Rs. 155 Mn.

Being in a nascent phase the company has been able to increase its market share in terms of GPW to 2.73% during Q1 FY2020 and improved its position to 17th during Q1FY2020.

About the issue

AJOD Insurance Company is issuing 3,000,000 units ordinary shares worth Rs 30,00,00,000 to the general public from Ashad 25, 2077. The early closing date of this IPO issue is on Ashad 29, 2077 and if the sue is not subscribed till Ashad 29 then this issue can be extended up to Shrawan 07,2077.

Out of the offered 30,00,000 units; 4% of the issued capital i.e. 1,20,000 units have been allotted for the employees of the company and 5% of the total offered a share to the general public i.e. 1,50,000 units have been allotted for the mutual funds. The remaining 27,30,000 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 has been appointed as the issue manager for the IPO issuance.

The paid-up capital will reach Rs 1.00 Arba after the issuance of the public shares. After the IPO issue; public holding will be 30% and promoters holding will be 70%.

Credit Rating:

CARE Ratings Nepal Ltd. (CRNL) has assigned grading of “CARE-NP IPO Grade 4” to the proposed Initial Public Offer (IPO) of AJOD Insurance Limited. “CARE-NP IPO Grade 4” indicates Below Average Fundamentals. CRNL assigns IPO grades on a scale of Grade 1 to Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals.

Key Grading Strengths:

  • Strong Promoter Group
  • Experienced board and management team
  • Diversified investment book with a fair return on investment

Source: (http://careratingsnepal.com/wp-content/uploads/2020/01/Grading-of-CARE-NP-IPO-Grade-4-assigned-to-Initial-Public-Offer-of-AJOD-Insurance-Limited.pdf)

Capital structure:

Shareholding Structure:

Board of Directors:

Management Team:

Financial highlights:

Conclusion

Non-life insurance is one of the most intensely competitive industry. With an increasing number of Non-life insurance, those companies which are in the nascent phase face difficulty to maintain their position. However, companies that have good and able management are able to make their company stand out from their competitors. Despite the competitive price war between the competitors, they are able to maintain their standard of service, and also they have given a fair return on their stakeholders. So, what is your view on the whole Non-life Insurance industry and AJOD Insurance Limited in particular? Will you be applying for the issue or will you pass?

How much to apply?

AJOD Insurance Limited is issuing 30,00,000 units shares where after the allocation of 4% and 5% to staff and mutual fund respectively, 27,30,000 units’ shares are available to the general public.

If we see the recently concluded IPO of NIC Asia Laghubitta Sanstha Limited; a total of 4,12,332 applicants applied for its IPO and we assume that same or even more craze prevails in AJOD Insurance Limited’s IPO too. Since 10 kitta rule exists for IPO; 2,73,000 applicants will be lucky enough to get the 10 shares of AJOD Insurance Limited.

To sum up, if the same number of applicants (or more) who applied for the NIC Asia Laghubitta’s IPO apply for this issue then there is a high probability of lottery for 10 units, however, not everyone may get it. Since the minimum unit is 10, it is advisable to apply 10 units minimum in the IPO issue of AJOD Insurance Limited.