Insurance Board Mulls to Allow LIC Nepal to Issue Right shares

Kathmandu. The officials of the Insurance Board have clarified that the proposal of right share issue by Life Insurance Corporation Nepal (LICN) will be treated differently.

Rajuraman Paudel, Executive Director of the Board has that LICN will be allowed to issue right share if additional FDI from it’s major promoter Life Insurance Corporation India is received for the same.

Paudel further clarified that companies with strategic partners, branches of foreign insurance companies and companies with more than 50 percent foreign investment should be treated differently than the domestic insurers.

For the domestic insurers, the Insurance Board has set Rs. 5 billion and Rs. 2.5 billion minimum paid up capital for life and non-life insurers respectively. The insurers are obliged to meet the capital requirement by the end of Chaitra 2079. During this period, insurance companies will not be allowed to issue rights shares covering major chunk of the additional capital. The Board has directed all the insurers to raise the capital through bonus share as far as possible.

Currently, the paid up capital of LIC is Rs. 2.65 billion. The Board of Directors of LIC India has already decided to invest 806.7 million Indian rupees in LIC Nepal, i.e. 1.29 billion Nepali rupees, in exchange of rights shares. The meeting of the meeting of BODs of LICN has already proposed to issue 88.45 percent right shares to raise additional paid up capital. LIC India owns 55 percent stake in LICN. With 25 percent stake Vishal Group is another major promoter in LICN while rest 20 percent share is owned by general public.

Executive Director Paudel informed that if the Government of India and the Government of Nepal agree to allow LIC India for additional investment, the BOard will have no objection for the same.

Life Insurance Corporation of India is making good profit from Nepal. Even so, the corporation is not in favor of reducing its stake in LICN.

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