Meghna Insurance Limited is a first-generation non-life insurance company that was incorporated on March 18, 1996.The major insurance services offered by the company are Fire, Marine Cargo, Marine Hull, Motor and Miscellaneous insurance. The majority of the revenue comes from its marine cargo segment (52%). A snapshot of the revenue decomposition of the company from the latest quarterly financial statements is depicted below:
Recently the Bangladesh Securities and Exchange Commission (BSEC) has approved the company’s IPO proposal on 1st March, 2022 to raise Tk 160 million from the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) under the fixed price method. The subscription period will begin on 11th May, 2022 and end on 18th May, 2022. The Post-IPO Paid Up Capital will increase to BDT 400 million from BDT 240 million in the Pre-IPO Paid Up Capital. The three merchant banks; Asian Tiger Capital Partners, Prime Bank Investment and UCB Investment are jointly working as issue managers in this IPO subscription process.
The company is focusing to utilize the IPO fund for the investment in the capital market, buy treasury bond, as well as investing in fixed deposits along with catering the IPO expenses. It will invest the major portion (60%) in FDR which implies a significant risk is that it may not generate a sufficient return from these investments, which may significantly curtail the company’s dividend payout ability in the future. The proportion of the IPO fund utilization plan is shown in the following chart:
According to 2018 statistics, this company’s penetration rate is shallow, and it means that they have immense opportunity to grow in the future. However, a matter of concern for the investors can be its recent decline in EPS and ROE. Their risk level can be stated as moderate because majority of the investment will be in FDR and Treasury securities. They also have a strong management capability with experienced authority.
The IPO Analytics report published by Royal Capital Limited has given this investment a 3 out of 5 rating and quoted that “the company falls in INVESTABLE grade”. So, the investors can invest in Meghna Insurance Company limited.
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You can also watch the Case Study Video on Meghna Insurance IPO –