Life Insurers prepare to issue IPO at premium

Kathmandu: Following Reliable Nepal Life Insurance for the IPO issue at premium, the other new life insurance companies too are preparing for the same. Reliable Nepal has started the process of issuing IPO with a premium of Rs. 112.

Reliable Life will be issuing IPO at Rs.212.It has submitted request to the Security Exchange Board of Nepal (SEBON).IME Life, Sun Nepal, Citizen Life and Mahalaxmi Life Insurance have not issued the IPO yet.

Earlier,IME Life Insurance Company had started the process of issuing primary shares at the base price but recently it has postponed it and preparing to issue IPO at premium. Sun Nepal and Citizen Life have already obtained the necessary approval from the Insurance Committee to issue shares at a premium.

Companies that have been profitable for three consecutive years can set a premium of upto twice the net worth per share.

As Nepal Rastra Bank has made provision for banks and financial institutions to issue primary shares at the base price, insurance companies have also been issuing shares at the basic price till now. But after Reliable Nepal got approval from the Insurance Board to issue shares at a premium, other companies are also tempted to issue shares at a premium.

Mahalakshmi Life Insurance will be eligible to issue primary shares only after preparing the audit report for the fiscal year 2076/77.

The Insurance Board is giving permission to the companies saying that the reserve fund of the companies will be strengthened by issuing shares at a premium.The Board has been saying that it will not obstruct the eligible companies as per the rules as the strengthening of the reserve fund will increase the risk-bearing capacity of the company and also have a positive impact on other indicators.

The Company Act has made provision for public companies to issue primary shares at a premium on the basis of prevailing rules and regulations. According to the Company Act, if a public company wants to issue primary shares with premium, the proposal has to be passed by the AGM. Similarly, there is a clear provision in the Securities Registration and Issuance Rules that shares can be issued at a premium.

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