Agrani Insurance again proposes issuing rights issues

Having failed to get regulatory approval last year, Agrani Insurance once again announced its intention to issue rights shares to enhance its paid-up capital.

The general insurer aims to raise Tk 68 million by issuing 6.8 million rights shares this time, according to a stock exchange filing on Sunday. If the regulator approves the rights shares, the company will be able to meet the minimum capital requirement.

The non-life insurer, as per the board meeting held on Saturday, decided to issue one rights share against existing five shares (1R:5) at an issue price of Tk 10 each.

Earlier, the stock market regulator rejected Agrani Insurance's proposal to float rights issues for what it said was the company's failure to submit a clear Credit Information Bureau (CIB) report of its directors.

Now, the company will submit an application after meeting all regulatory requirements and so expects to get the permission, the company secretary said.

As per the Insurance Act 2010, a general insurance firm must maintain a minimum paid-up capital of Tk 400 million. The Insurance Development and Regulatory Authority (IDRA) time and again asked insurers to maintain the minimum paid-up capital.

If a company suffers financial losses or if its income falls drastically, low paid-up capital may lead to inability to pay customers' insurance claims.

Presently, Agrani Insurance's paid-up capital is Tk 339.8 million. If it is allowed to issue rights shares this time, its paid-up capital would be more than Tk 407 million.

The rights issue is an offer of new shares by a company to its existing shareholders in proportion to the shares that they already own and usually at a discount to the market price within a stipulated time.

Company secretary Md Mofizur Rahman said that apart from acquiring capital adequacy, the company needed the rights proceeds to strengthen its capital base.

"The company will invest in shares and fixed deposit receipts, which will increase its income," he said.

The issuance of rights shares, however, is subject to approval of shareholders at the upcoming extraordinary general meeting (EGM) and of the Bangladesh Securities and Exchange Commission (BSEC).

To get the shareholders' consent, it will hold an EGM on April 28 and the record date is April 24. If the company receives the regulatory approval, it will announce another record date to determine who will be able to subscribe rights shares.

Financial Performance

Despite persistent macroeconomic challenges, Agrani Insurance posted a double-digit profit growth year-on-year for 2023, riding on higher underwriting and increased interest income.

The general insurer's consolidated profit grew 13 per cent year-on-year to Tk 71.36 million in 2023.

Accordingly, its consolidated earnings per share (EPS) stood at Tk 2.10, up from Tk 1.86 a year ago, according to a stock exchange filing on Sunday.

The general insurer does business mainly in three segments -- fire, transport, and marine. The board recommended providing a 12 per cent cash dividends to shareholders for 2023.

The stock rose 3.87 per cent to Tk 37.6 per share on the Dhaka Stock Exchange on Sunday.

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