Things to know for prospective investors about IPO of Reliance Life Insurance Limited; advisable to apply minimum 20 units
Wed, Aug 19, 2020 1:13 PM on IPO/FPO News, Company Analysis, Financial Analysis,
Company Profile:
Reliance Life Insurance Limited (RLIL) is a public limited company, which came into operation from Manghsir-01, 2074. Its head office is located in New Baneshwor, Kathmandu. Reliance Life was licensed by the Insurance Board (IB) in 2016/2017. The company has been promoted by Siddhartha Bank, Agni Group, MC Group, Kedia Organization, Reliance Group, etc.
Reliance Life Insurance is a new player in the industry that has been in operation with 88 branches. The company has 9,205 individual agents who are spread across the country extending the company’s business horizon.
The total Paid-up capital of the company till Ashad 2076/2077 is 1.47 Arba. Till Ashad's end of FY2076/2077, the company earned a gross premium of Rs. 1.49 Arba and Net Profit after tax of Rs. 4.13 crore.
About the Issue:
Reliance Life Insurance Company Limited is issuing 6,300,000 units of ordinary shares worth Rs. 63 crores to the general public from Bhadra-04, 2077. The early closing date of this IPO issue is on Bhadra-08, 2077. If the issue is not subscribed till Bhadra-08, 2077 then the issue will be extended up to Bhadra-22, 2077.
Out of the total issue offered i.e. 6,300,000 units; 5% of the issue i.e. 315,000 units have been allotted for the employees of the company and 5% of the total issue i.e. 315,000 units have been allotted for the mutual fund. The remaining 5,670,000 units are for the general public.
Applications can be placed for a minimum of 10 units and a maximum of 63,000 units. Sanima 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 67.50%.
Reliance Life Insurance Limited:
|
|
Percentage |
Units |
Amount |
|---|---|---|---|
|
Total Capital |
100% |
21,000,000 |
2,100,000,000 |
|
Total Issue |
30% |
6,300,000 |
630,000,000 |
|
Employees |
1.5% |
315,000 |
31,500,000 |
|
Mutual Fund |
1.5% |
315,000 |
31,500,000 |
|
Public |
27% |
5,670,000 |
567,000,000 |
|
Issue Manager |
Sanima Capital Limited |
|
|
|
Issue open date |
Bhadra-04,2077 |
|
|
|
Issue closing date (earliest) |
Bhadra-08,2077 |
|
|
|
Issue closing date (latest) |
Bhadra-22,2077 |
|
|
|
Minimum application |
10 |
|
|
|
Maximum application |
63,000 |
|
ICRA Rating:
ICRA Nepal has assigned a grading of (ICRANP) IPO Grade 4, indicating below-average fundamentals; to the proposed IPO of Rs. 63 crore or Reliance Life Insurance Limited (RLIL). ICRA assigns IPO grades on a scale of Grade 1 to 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals.
Key Grading strengths:
- Strong Promoters Profile
- High portion of long-term endowment business in overall premium earnings
- Adequate reinsurance support
- Adequate quality of investment with good investment earning potential
- Adequate solvency profile
Capital Structure:
|
Capital Structure |
|
|
Authorized capital |
3,000,000,000 |
|
Issued Capital |
2,100,000,000 |
|
Current paid-up capital |
1,470,000,000 |
|
Paid-up capital after this IPO |
2,100,000,000 |
Shareholding Structure:
|
|
Number of shares |
Amount |
Percentage |
Remarks |
|---|---|---|---|---|
|
Promoter shareholders |
1,47,00,000 |
1,470,000,000 |
70% |
Already Issued |
|
General Public |
63,00,000 |
630,000,000 |
30% |
To be issued |
|
Total |
21,000,000 |
2,100,000,000 |
100% |
- |
Board of Directors:
|
Board of Directors |
||
|---|---|---|
|
S. N |
Name |
Position |
|
1 |
Mr. Tara Chand Kedia |
Chairman |
|
2 |
Mr. Bharat Kumar Todi |
Director |
|
3 |
Mr. Jagdish Kumar Agrawal |
Director |
|
4 |
Mr. Amit Kumar Begani |
Director |
|
5 |
Mr. Sundar Prasad Kadel |
Director (Representative Siddhartha Bank Ltd.) |
Management Team:
|
Management Team |
||
|---|---|---|
|
S. N |
Name |
Position |
|
1 |
Mr. Pravin Raman Parajuli |
Chief Executive Officer |
|
2 |
Mr. Nirajan Kandel |
Deputy CEO |
|
3 |
Mr. Sandeep Singh |
Head- Human Resources |
|
4 |
Mr. Gyan Bahadur Rayamajhi |
Chief Operating officer |
|
5 |
Mr. Surya Prakash Gupta |
Head-Agency Sales |
|
6 |
CA Sujeep Shrestha |
Finance Manager |
|
7 |
Mrs. Satya Parajuli |
Head-Reinsurance |
|
8 |
Mr. Sandeep Kasaju |
Head-Agency Sales |
|
9 |
Mr. Anoj Thapa |
Head-Corporate |
|
10 |
Mr. Bishal Shrestha |
Head-Agency Distribution |
|
11 |
Mr. Puskar K.C |
Head-IT |
|
12 |
Mr.Ekraj Pathak |
Head-Underwriting |
|
13 |
Mr.Sanjeev Kumar Singh |
Head-Claims |
|
14 |
Mr.Muna Poudel |
Company Secretary |
|
15 |
Mr. Aadar Bhandari |
Compliance |
Financial Highlights:
|
Particulars |
Actual |
Estimated* |
||||
|---|---|---|---|---|---|---|
|
2074/2075 |
2075/2076 |
2076/2077* |
2076/2077 |
2077/2078 |
2078/2079 |
|
|
Total Paid-Up capital ('000) |
1,470,000.00 |
1,470,000.00 |
1,470,000.00 |
2,100,000.00 |
2,100,000.00 |
2,100,000.00 |
|
Reserve & Surplus ('000) |
78,705.47 |
100,019.60 |
137,764.14 |
260,587.09 |
442,093.94 |
891,507.49 |
|
Contingent Fund |
8,928.89 |
11,582.29 |
15,919.80 |
30,422.44 |
49,202.93 |
81,102.80 |
|
Gross Premium ('000) |
85,564.75 |
742,433.93 |
1,493,307.91 |
2,369,467.07 |
3,602,367.14 |
5,191,382.80 |
|
Net Premium ('000) |
83,719.11 |
717,419.10 |
1,368,961.26 |
2,236,550.92 |
3,393,174.06 |
4,887,705.37 |
|
Investment Income |
185,630.50 |
192,165.80 |
216,020.33 |
321,576.04 |
529,641.32 |
892,698.65 |
|
Net Profit ('000) |
89,229.47 |
22,617.60 |
41,342.80 |
108,182.53 |
192,231 |
395,659.12 |
|
Net Premium/Gross Premium |
97.84% |
96.63% |
91.67% |
94.39% |
94.19% |
94.15% |
|
Earnings per share (Rs.) |
6.07 |
1.54 |
2.81 |
5.15 |
9.15 |
15.03 |
|
Net worth per share (Rs.) |
105.96 |
107.59 |
110.45 |
114.00 |
123.35 |
138.70 |
|
Return on Equity (%) |
5.72% |
1.42% |
2.54% |
4.51% |
7.42% |
13.58% |
(2076/2077* is the figure till Ashad end)
(*Estimated figure)
(*Estimated figure)
(*Estimated figure)
(*Estimated figure)
Conclusion:
The life insurance industry in the last 5 years has been one of the competitive industries with the Insurance Board issuing licenses to 10 life insurance companies taking the number to 19 companies. With just 3 years of operation history of the RLIL, the growth for the company depends on the innovation and marketing. Since the company is still in the nascent phase and had less than 1% market share in terms of premium collection the company might face difficulty to maintain the past growths.
However, the company improved its market share to 1.4% in terms of the premium collection in Q3, 2076/2077. Also, it had an annual growth rate of 37% which if the company is able to maintain, it could lead itself to secure a higher position. On the brighter side, the insurance industry in the nation is able to tap into only 25% of the market which if the company taps into the broader market then there is still higher growth for the companies.
So, what is your view on the whole Life insurance industry and Reliance Life insurance Limited in particular? Will you be applying for the issue or will you pass?
How much to apply?
If we see the recently concluded IPO of Ajod Insurance and Sadhana Laghubitta; more than 4.5 lakh applicants applied for the issue and we assume that the same or even more craze prevails in Reliance Life Insurance Limited’s IPO too. Since 10 kitta rule exists for IPO; 567,000 applicants will be lucky enough to get the 10 shares of Reliance Life insurance.
To sum up, if the same number of applicants (or more) who applied for the Ajod Insurance and Sadhana Laughubitta’s IPO apply for this issue then there is a high probability of getting 10 units and few applicants can get 10 units extra. So, it is advisable to apply 20 units minimum in the IPO issue of Reliance Life Insurance Limited.
