Prajna Capital - An Investment Guide

VALUATION of insurance companies is back on the regulator’s radar. The insurance regulator Irda is on course to develop commonly accepted benchmarks and disclosures to value insurance companies, as this would be crucial when Indian partners dilute their shareholding from 74% to 26%. The present regulation requires Indian promoters with a majority shareholding to dilute their stakes through an initial public offering ( IPO ) at the end of the tenth year of operations. The value of insurance companies hinges on several assumptions, which could result in wide variations. It is different from valuing, say, brick-and-mortar companies listed on the stock exchange. Their valuation is generally based on the price-earning multiple — a measure of the price paid for a share relative to the profit earned per share. A high PE multiple suggests that investors expect higher earnings growth in the future. But this exercise is much more complex for insurers. Once an insurance company receives the premi...

Retail investors applying for initial public offerings ( IPOs ) of companies are expected to get a huge relief relating to refunds from such offerings. On Thursday, Securities and Exchange Board of India ( SEBI ) said an alternate payment system, aimed at mitigating time taken for refunds, would come into effect from Monday. The new system, will ensure that the money of such investors is not withdrawn from their bank accounts but are just blocked till shares are actually allotted to them. The new system, called Applications Supported by Blocked Amount ( ASBA ), will be helped by a host of SEBI-certified lenders called Self Certified Syndicate Banks (SCSBs). In the first tranche, three banks — Corporation Bank, HDFC Bank and Union Bank of India — have been allowed to act as SCSBs. “These banks will act as SCSBs in public issues which open on or after September 1 onwards,’’ SEBI noted in a release. The IPO application forms for this payment mode will be submitted to banks which have ...