Prajna Capital - An Investment Guide

Non-life insurance companies say premium charged on policies sold by them is likely to increase from next year because of a proposed change in the way their income is calculated. The Union Budget for 2009-10, presented on July 6, wants to classify profits or gains made from their investment as business income, which would be taxed at the corporate tax rate. Similarly, loss from the sale of investment can be set off against taxable income. At present, profits from the sale of investment by non-life insurance companies are not included in their business income. State-owned general insurance firms make a profit of Rs 2,000 crore from the sale of equities on an annual basis. “It will mean a capital loss of Rs 600 crore. Therefore, the only way insurance companies will deal with it is by increasing the rate of premiums,” said M Ramadoss, chairman and managing director of state-owned Oriental Insurance Company Ltd, at a conference organised by industry body Ficci. Analyasts say that the inte...

Where can an investor get a form for applying/ bidding for the shares? The form for applying/bidding of shares is available with all syndicate members, collection centers, the brokers to the issue and the bankers to the issue. These are also available with your friendly neighborhood news paper vendors and sub brokers. How are offer documents prepared? The offer documents such as prospectus etc. are prepared by an independent entity know as Merchant Banker, which is registered with regulatory authority SEBI. They are required to carry out due diligence while preparing an offer document. The draft offer document submitted to SEBI is put on website for public comments. Is it compulsory for an investor to have a Demat Account? All the public issues of size in excess of Rs.10 crore, are to made compulsorily in the demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory demat mode, he has to have a demat account and has the responsibility to put the...

NHPC, Oil India To Go Ahead, Dozen Others To Wait For Now DESPITE all the hoopla over disinvestment picking up pace following the Left’s withdrawal of support to the UPA government, only two public sector companies may get listed during 2008-09. These two companies are NHPC and Oil India. Plans were afoot to list around 15 public sector companies, including heavyweights such as BSNL, RITES, Coal India and Cochin Shipyard, but public offers of most of these companies are stuck for various reasons. According to government sources, the plans for listing many PSUs have been deferred due to reasons ranging from no or little requirement for raising capital, corporate governance issues and possible protests from employee unions. The government is all for listing of public sector units as it unlocks tremendous value and creates good corporate governance. The companies, however, need to clear regulatory and internal hurdles as per a senior official in department of disinvestment ( DoD ...

Eleven banks participated in the mock test carried out by the Bombay Stock Exchange (BSE) for the new IPO payment facility recently permitted by SEBI. The first IPO in which the facility will be used is that of 20 Microns, which opens on Monday. This facility, called the Application Supported by Blocked Amounts (ASBA), allows banks to block IPO application money in the applicant’s bank account till the time of allotment of shares. Only that amount proportionate to the share allotment will be transferred from the account. The markets regulator has said that ASBA will be operationalised from Monday. . This coincides with the opening of the IPO of 20 Microns, the first issue in which the ASBA process will be used by investors. Interface tested “BSE has successfully tested its interface with 11 banks for participation in the ASBA (Application Supported by Blocked Amounts) process,” said a BSE news release. The 11 banks that participated in the mock test were Bank of Baroda, Corporation Ban...

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...

SEBI has changed the payment process for IPOs and this will benefit individual investors There is some good news for the investors. The market regulator, Securities and Exchange Board of India ( SEBI ), has changed the payment process for subscribing to initial public offers ( IPO ) and rights issues. Under the new process, the application money will remain in the bank account of the applicant till allotment is finalized. Currently, the money is debited from the bank account, and based on the number of shares allotted, the excess money is returned. According to SEBI, the new system would eliminate the refund process. The modalities of the entire process will be worked out separately. The SEBI Board has approved, in principle, the concept of making a lien on the bank account an alternative mode of payment in public/rights issues. This means the money earmarked for the IPO will not be used for any other payment obligation during that period. At the same time, the applicant will get t...