Multi-crore, diversified group Larsen & Toubro (L&T) today said it would enter the general insurance in the next six months and would go solo in its new venture.
"We have decided to enter into general insurance business considering the long-term potential of the business going forward," L&T Chief Financial Officer Y M Deosthalee told reporters here.
There are about 20 players, including four public sector firms, in the non-life insurance business.
"We are not partnering with anybody at this point of time for our general insurance foray which will take shape in six months. We would like to go on our own," he said.
As per the existing guidelines, a foreign partner is allowed 26 per cent stake in non-life ventures. They, however, cannot set-up wholly-owned subsidiaries in India.
General insurance would be a separate entity and the money required for the venture essentially will be in the form of equity and that will be from the parent L&T, the engineering and construction major, Deosthalee said.
Asked about funding for the insurance foray, Deosthalee said it would depend on the business plan which is in the process of being finalised.
L&T, which has a significant presence in IT and finance, is expected to approach the Insurance Regulatory and Development Authority (IRDA) for approval.
The company is also venturing into the asset management business but this is still in the preliminary stage, he said.
2 comments:
Dear Gaurang – Thanks for your good words. There is nothing to talk about the Face value when viewed fundamentally. The EPS is adjusted according to the face value hence there will not be any big threat in it.
Face value is the ‘par value’ of the stock. It has no connection with the market (means demand & supply). Simply it can be said as the nominal value of a share/stock which is fixed by the issuing company as a minimum price.
Means generally speaking the initial investment is divided in the parts(shares) and each part is having the value of 10/-. If A is buying a 100 shares in IPO means he is investing 1000/- as one share have the fixed price (FV) of 10/-.
In practical, even in IPO’s no company is coming with the FV rate means at the rate of 10/-. They are charging a premium to the share value and there are so many reasons for this premium.
For example, if a company already established but coming to the primary market (IPO) due to the requirement of the funds. In this case, company can be sitting on the profits, having bigger EPS number and can deliver good dividends. So, when a company is paying a good amount of the dividend on the face value then that dividend value should enhance the investors interest which leads to good amount of premium to the face value.
If a FV 10/- company is delivering a EPS of 13/- (take Gammon India for example) means one can assume that he is getting 130% return on his initial investment (those who invested at the Face value rate). But at the current conditions expecting the 8% return on the fixed income side, then the price to buy that particular stock would be 100*13/8= 162.5/-. If one buys the Gammon India at 162.5/- then his rate of return on investment is about 8% (on the basis of EPS).
Companies have Face value of Rs.10/- generally but some stocks can have FV100/- or FV 1000/- and some have 1/- 2/- and 5/-also.
The EPS is adjusted according to the Face value of the stock hence when we are speaking fundamentally there is nothing to talk about the Face value.
Happy investing
Be and Make
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In reply to the …
Hi - I have a very basic query. Would request you to please help me and oblige.
What does the Face Value of a stock mean? – I understand and have been heard and told that the Face Value is nothing but the original printed price of the stock and the price of the stock in the primary market. I agree with the same. However – my query comes from a different angle.
What is the importance of the face value of a stock? E.g. in case of Adani Power IPO – the face value is Rs. 10/- but the stock is issued at a premium and is priced at Rs. 100/-. I would rather wonder that can’t the actual – original price of the stock be 100/-?
The primary reason being that though the share is priced at 10/-, the same is being sold to the public at 100/-. When it is to be sold at 100/- then better to have the original cost as 100/- and not 10/-.
But am sure that it is not that simple. There must be some logic in having the face value fixed at Rs. 10/- and there must be some significance of the face value price – maybe in times of company bankruptcy etc.
Can you please explain me and help me sir?
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Regards
Gaurang Jhaveri
Nice post on insurance.
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