Nepal Reinsurance Company plans Rs1.6 billion initial public offeringThe company applied to the Securities Board of Nepal on Sunday for approval.
Nepal Reinsurance Company has applied to the Securities Board of Nepal to sell Rs1.6 billion worth of stock in an initial public offering.
The country’s only reinsurance company plans to raise its paid-up capital to Rs10 billion from the existing Rs8.40 billion with the initial public offering. “As part of the final process to issue shares to the public, we registered an application at the board on Sunday,” said Damodar Bhandari, officiating chief executive officer of the company.
According to the board, the reinsurer has applied to issue 16,000,000 units of primary shares. The company has appointed RBB Merchant Banking as issue manager.
The reinsurer said it moved to make the initial public offering after the government agreed to raise its stake in Nepal Reinsurance Company to 44.03 percent from the current 43.55 percent. The company has an authorised capital of Rs15 billion and an issued capital of Rs10 billion.
The reinsurer had aimed to offer shares to the general public last year, but it had to postpone its plan due to delays by the government.
Bhandari said the annual general meeting held on June 17 approved the government's new stake. The company will be issuing 16 percent of its shares to the general public after receiving approval from the regulator.
The reinsurer has received a credit rating of ICRANP IPO Grade 2 for its public offering from ICRA Nepal. The credit rating shows above-average fundamentals of equity shares of the company, according to ICRA Nepal.
The reinsurer began operations in November 2014. The company's establishment has helped to check the outflow of a huge amount of funds in insurance premiums paid by domestic insurance companies to foreign reinsurers.
The government made it mandatory for Nepali insurers to reinsure at least 20 percent of their policies with domestic reinsurance companies through the budget statement for fiscal 2018-19.
Apart from the government, 17 domestic insurance companies hold major stakes in Nepal Reinsurance Company. Private sector business entities including the Vishal Group and the IME Group jointly own around 9 percent of the company.
Nepal Reinsurance Company has expanded its operations across 30 countries including member states of the South Asian Association for Regional Cooperation. The company has clients in the United Arab Emirates, Bahrain, Papua New Guinea and a number of African countries including Kenya. Bhandari said they planned to diversify the business after raising the working capital.
In 2003, the government set up the Insurance Pool with the aim of preventing money from going out of the country in reinsurance premiums, which was later converted into Nepal Reinsurance Company.
In the last fiscal year, the company earned a net profit of Rs1.18 billion out of which 84 percent was from non-life insurance businesses. The company made a net profit of Rs1.01 billion in fiscal 2017-18.
As of mid-July, it had collected premiums worth Rs5.53 billion, including Rs2 billion in the last fiscal year. Of the total premium amount, it collected Rs5.12 billion from non-life insurance businesses and the rest from life insurance businesses.