Kathmandu. Guardian Micro Life Insurance has made a bet to attract investors by offering the lure of right shares to boost the share price.
The company’s board of directors, held on Monday, has called for a special general meeting, just a week after the second annual general meeting. The special general meeting has been called for Baisakh 5. The second annual general meeting was held on Chaitra 11.
The company’s board of directors has also decided to pass a proposal to issue 100 percent right shares in the ratio of 1:1 of the current paid-up capital through the same special general meeting. The company’s current paid-up capital is Rs 750 million.
With the announcement that the company will issue 100 percent right shares, the company’s share price has entered a positive circuit in the secondary market today. As of the time of filing this news, the company’s share price has increased by Rs 234.50 per share to Rs 2,579.80.
Investors are flocking to the company’s shares, lured by the right shares. However, the company’s right shares are unlikely to come immediately. Since the company can issue right shares only after fulfilling many regulatory provisions, it seems that it will take more than 2 years. If the regulatory provisions are not fulfilled, the right shares may not come. In that situation, there is a possibility that direct investors who bought Guardian Micro Life shares at a high price will be trapped.
According to the Securities Issuance and Allotment Guidelines, a company can issue right shares after 180 days from the last public issue. Right shares can be issued only once in a fiscal year, and the face value of the shares already issued must be fully paid up.
Before proceeding with the process of issuing right shares, any insurance company must obtain prior approval from the regulatory Nepal Insurance Authority. However, it has been found that Guardian Micro Life has not proceeded with the process for prior approval from the Insurance Authority to issue right shares.
Sushildev Subedi, Executive Director and Spokesperson of the Insurance Authority, informed that Guardian Micro Life has not submitted any documents to the authority to issue right shares. “No process has been taken forward with the authority to issue right shares until the financial statements of that company are approved,” he said.
Ram Prasad Poudel, Information Officer and Company Secretary of Guardian Micro Life, said that the proposal to issue right shares will be taken to the special general meeting as the Insurance Authority has asked it to maintain risk-based capital until 2084 BS. “We have seen that if we do not move forward with the process of issuing right shares from now on, there is no possibility of maintaining risk-based capital as per the regulator’s instructions by 2084 BS, which is why we are moving forward with the process now,” he said. “Now, whether the Insurance Authority gives approval or not depends on the authority. We will issue right shares only if the authority gives approval.”
Poudel said that it is wrong to call a special general meeting in a hurry to pass the agenda of right shares just to raise the share price. “The agenda of issuing right shares could have been taken up in the second annual general meeting, but due to circumstances, that could not happen,” he said. “That is why preparations are being made to call a special general meeting and pass the proposal to issue right shares.”
