--By Rashika Pokharel
Within the eleven years of operation, Nepal Life Insurance Company has set up an excellent business record and built a strong financial position. Now the company wants to split its shares of Rs. 100 as face value to Rs. 10 each. And that has created ripples across the market as to how the company is going to execute this idea. The latest Annual General Meeting of the company has already approved this proposal, but the company is yet to get approval from the regulators.
The main reason behind splitting of shares is to make more people able to buy the company’s shares from the stock exchange. The Rs. 100 face value shares of the company are trading at around Rs. 3,700 per share in recent weeks.
"At this rate, it is difficult for the ordinary people to afford investing in bigger amount of shares. This plan will make the shares affordable to these people and pave way for them invest and enjoy the returns.,” says Vivek Jha, CEO of Nepal Life Insurance Company.
But the split is not going to make any difference on this. At present, with Rs. 100 as face value, an investor has to buy at least 10 shares which means an investment of Rs 37,000. After the split, an investor has to buy minimum of 100 shares, which again means Rs. 37,000.
The prevailing Companies Act 2006 does not have provision allowing to split shares, but neither is it prohibited. Same is the case with other laws related to the companies. But splitting shares is a prevailing international practice. However, the Companies Act 2006 has specified that the face value of a share of a company shall be Rs. 100. Therefore, the company is still not sure how the government will respond to its plans. But the company’s management claims that a way forward will definitely come out, as their intentions on doing so are noble.
When a company splits shares and as a result the number of shareholders increases multiple times, it can bring corresponding rise in complications to manage company affairs. For example, its share register will be long, communicating with the large number of shareholders and organising shareholders meetings will be difficult. But the company says that will be managed with technology. The Central depository system (CDS) will help in this, they say.
"Concerned authorities have been reviewing our request. They have approached the government and so far we have not received any positive indications. It is a challenging proposition, as existing laws do not cover the issue," says Jha.
The company believes that the authorities will accept the proposal as it is not going to affect the insurance operations of the company. It will affect only the ownership. Jha claims that the company has been performing very well and has increased its productivity and market share in the recent years. In the last four years the company almost doubled its market share from 22 per cent to 41 per cent. Business grew by nearly 100 per cent last year and during the first two months of this year its business has grown by 100 per cent."There is huge potential for the company in the market and right now NLIC is trying to tap these potentials in a better way. We feel that we will perform even better in the coming days by improving our services,” Jha says.
Customer Satisfaction: A Major Priority
Nepal Life Insurance Company
The Company prioritizes customer satisfaction and claims that it is trying increase and expand its reach across the country. It gives special emphasis on capacity building of its staff members and most importantly its agents, who are in direct contact with the clients. "Almost 99.9 per cent business in this sector is through agents. So, first of all agents have to build up trust with the people and only then the company will gain their trust," informs Jha.
Recent Activities and Plans
The company is planning to increase agents across the country and subsequently increase its penetration. Along with that it is also increasing its service portfolio by introducing more products. It has lined up two more products for the market by the end of this current fiscal year. Among its products, the money back plan is one of the best as it provides fast money returns within two, three or four years to its client.
"There is lack of awareness and trust on insurance company. Nobody is willing to wait for 15 years to get the returns. Everybody wants fast return. Our money back plan aims to increase the trust of people on insurance companies. We have high liquidity products and they are doing quite good," says Jha. The money back plan is the largest selling product of the company and thus it wants to introduce more choices in this segment.
The company's return to the share-holders has taken a massive leap in the last two year and its share price in the market has boomed."Increase in our share price have not only benefitted investors but has also immensely increased trust level of normal people on the company,” Jha asserted.
Company's Growth Rate
The company has been able to attract large numbers of investors in the recent years. Presently it has 10,000 shareholders and around 1 million policyholders."Investors will be automatically attracted to the company’s business if we can double the number of shareholders to 20,000. Our objective is providing opportunities to a lot of people for investing in our company," Jha informed.
NLIC has been providing direct employment to 300 employees, and indirect employment to over 13,000 agents that have enlisted around one million policy holders "We have highly productive young employees. The average age of our employees is around 26 years and this has kept us ahead of others," informs Jha.
The company operates through its more than 100 outlets throughout the nation. It has 30 main branches and rest are sub branches, extension counters and cells. It is presently working on connecting these outlets through an online system. "We are working on connecting our branches directly our corporate office through an online system called Real Time system. Most of our outlets are already connected and we are working on connecting the remaining ones,” Jha informed. The company has branches in all major cities of the country including presence in rural areas such as Humla, Jumla, Taplejung, among others. Jha said that the company is planning to have outlets along the Madhya Pahadi Rajmarga (mid-hill highway).