Nepal Reinsurance Company has been making headlines in the stock market lately. The main reason is its plan to issue 100% rights shares. This move has attracted huge trading activity in the secondary market.
The company had announced its decision to issue rights shares to raise capital and sent the proposal to the Nepal Insurance Authority and the Ministry of Finance for approval. Although the proposal has reached the authority, further procedures have not moved ahead.
To issue the rights shares, the government would need to invest around Rs 5.91 billion, as it owns 44.04% of the company. Currently, Nepal Reinsurance has a paid-up capital of Rs 13.42 billion. The plan is to double it to Rs 26 billion. But the government has not allocated any budget for this investment in the current fiscal year.
According to sources, after the board decided on the rights issue, certain interest groups have been trying to take control of the government’s shares. Without the government adding its investment, the rights issue cannot be approved.
The Nepal Insurance Authority has directed the company to increase its paid-up capital to Rs 20 billion by the end of Magh 2081. Since this deadline could not be met, the ministry requested an extension, and the authority gave an extra year — until Magh 2082.
However, with no government budget set aside for investment, there is still a possibility that the ministry could again request more time. As the extended deadline draws closer, secondary market activity in the company’s shares has seen unusual movements.
Reports suggest that some groups are buying large volumes of Nepal Reinsurance shares to create price fluctuations, putting small and unaware investors at high risk.
