Shikhar Insurance has announced a further public offering (FPO) despite new guidelines from the Securities Board of Nepal (Sebon) forbidding listed companies from making frequent FPOs to raise capital.

The insurance company said it decided to launch FPO to boost its paid-up capital to Rs1 billion as required by the Insurance Board (IB).

Shikhar Insurance has written to the IB and the Nepal Stock Exchange (Nepse) saying that its board meeting held last Thursday decided to propose issuing bonus shares and conduct an FPO to meet the new minimum capital requirement. The IB has given insurers until the end of fiscal 2017-18 to do so.

Shikhar Insurance’s current paid-up capital stands at Rs815.8 million. It needs another Rs184.2 million to meet the minimum requirement.

However, the company’s planned FPO goes against the Securities Issue and Allotment Guidelines 2017 which says that there must be a gap of at least five years between FPOs.

Shikhar Insurance last made an FPO on December 3, 2015. The company issued 510,988 shares at a premium. It sold the shares for Rs550 apiece. According to Sebon’s guidelines, the company cannot make another FPO for three and a half years.

Shikhar’s 12th annual general meeting had okayed floating 1,362,000 shares at the FPO. Subsequently, it applied to Sebon to conduct the FPO and sell shares for Rs1,620 apiece. The application remained pending as Sebon was in the process of issuing the new guidelines, Sebon officials said.

“Sebon will ask Shikhar Insurance about its announcement to conduct a new FPO,” said Sebon Spokesperson Niraj Giri.

Shikhar Insurance and Nepal Life Insurance among insurance companies have conducted FPOs. As per the experts, the company can capitalise the premium value received from new investors if it conducts an FPO which relieves existing shareholders from the burden of injecting more capital by themselves. In addition, new investors are taking a higher risk by buying shares at a premium.

Nepse officials are unhappy over Sebon’s move to limit FPOs. “Although the regulation will minimise risks to investors to some extent, the regulator’s attempt at micromanagement is not appropriate when the country has adopted the concept of a free economy,” a Nepse source said.

No more than 2 demat accounts, says Sebon

KATHMANDU: Sebon announced on Sunday that share investors would be allowed to have a maximum of two demat accounts each. 

Sebon Spokesperson Niraj Giri said the restriction on the number of demat accounts would help to properly manage stock transactions besides maintaining transparency in the sector.  “We have aimed to check possible manipulation by investors who hold multiple demat accounts with the new rule,” Giri said. As per Sebon, investors who have more than two demat accounts will have to cancel their extra accounts by mid-September.