February 17, 2021 | Investopaper
The market capitalization of a company refers to the total market value of the outstanding shares of that company. So, basically the market capitalization (also known as market cap) of a company is obtained by multiplying the market price per share to the number of outstanding shares of that company. This calculation will help you to determine the size and the strength of the company in the market.
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Market capitalization can be helpful to diversify your portfolio because it is essential to pick different sized companies to minimize the risk associated with your investment. In order to compute the market capitalization of a company, we should know the current market price and the total listed shares of the company.
There are currently 20 non-life (general insurance companies operating in Nepal. Out of the 20 companies, two (National and Oriental) are the branches of foreign insurance companies. Hence, they are not traded in Nepal Stock Exchange (NEPSE) and have no quoted market price. Here, we will compute the market value of the remaining 18 non life insurance companies.
Total Number of Shares Of Non-Life (General) Insurance Companies
|S.N||Non-Life Insurance Companies In Nepal||Paid-Up Capital (Rs In Crores)||Total Listed Shares (in Lakhs)|
|1||Shikhar Insurance Company Limited||137.45||137.45|
|2||Neco Insurance Company Limited||131.74||131.74|
|3||Nepal Insurance Company Limited||115.03||115.03|
|4||Lumbini General Insurance Company Limited||114.18||114.18|
|5||NLG Insurance Company Limited||109.63||109.63|
|6||Everest Insurance Company Limited||109.59||109.59|
|7||IME General Insurance Company Limited||108.18||108.18|
|8||Premier Insurance Company Limited||107.45||107.45|
|9||Himalayan General Insurance Company Limited||106.82||106.82|
|10||Prabhu Insurance Company Limited||105.62||105.62|
|11||United Insurance Company Limited||102.81||102.81|
|12||Prudential Insurance Company Limited||102.64||102.64|
|13||Sagarmatha Insurance Company Limited||100.12||100.12|
|14||Ajod Insurance Company Limited||100||100|
|15||General Insurance Company Limited||100||100|
|16||Sanima General Insurance Company Limited||100||100|
|17||Siddhartha Insurance Company Limited||100||100|
|18||Rastriya Beema Company||26.66||26.66|
|19||National Insurance Company Limited||–||–|
|20||Oriental Insurance Company Limited||–||–|
Source: Unaudited Second Quarterly Report, FY 2077/78
Note: National Insurance and Oriental Insurance are the branches of foreign insurance companies. Hence, they have no capital.
Market Capitalization Of Non-Life (General) Insurance Companies In Nepal
|S.N||Non-Life Insurance Companies In Nepal||Total Listed Shares (in Lakhs)||Market Share Price (Rs)||Market Capitalization (Rs ‘Arba’)|
|1||Rastriya Beema Company||26.66||16670||44.44|
|2||Shikhar Insurance Company Limited||137.45||2770||38.07|
|3||Neco Insurance Company Limited||131.74||1824||24.03|
|4||Sagarmatha Insurance Company Limited||100.12||1575||15.77|
|5||Premier Insurance Company Limited||107.45||1280||13.75|
|6||NLG Insurance Company Limited||109.63||1162||12.74|
|7||Siddhartha Insurance Company Limited||100||1259||12.59|
|8||IME General Insurance Company Limited||108.18||1100||11.90|
|9||Prabhu Insurance Company Limited||105.62||969||10.23|
|10||Nepal Insurance Company Limited||115.03||880||10.12|
|11||Lumbini General Insurance Company Limited||114.18||815||9.31|
|12||Prudential Insurance Company Limited||102.64||817||8.39|
|13||Everest Insurance Company Limited||109.59||747||8.19|
|14||Ajod Insurance Company Limited||100||774||7.74|
|15||Himalayan General Insurance Company Limited||106.82||714||7.63|
|16||Sanima General Insurance Company Limited||100||718||7.18|
|17||General Insurance Company Limited||100||710||7.10|
|18||United Insurance Company Limited||102.81||670||6.89|
|19||National Insurance Company Limited||–||–|
|20||Oriental Insurance Company Limited||–||–||–|
The market share price is taken from Nepal Stock Exchange (NEPSE) dated February 16, 2020 [Falgun 4, 2077 BS]. At current the share price as well as market capitalization may vary.
Since, the shares of National Insurance and Oriental Insurance are not traded in NEPSE, the market price is unknown. Hence, the market capitalization of these companies could not be computed.
From the above table, we see that Rastriya Beema Company (RBCL) has the highest market value among the general insurance companies with Rs 44.4 Arba. Shikhar Insurance (SICL) is second to RBCL with the total market capitalization of Rs 38.07 Arba. Neco Insurance (NIL) is the third largest general insurance in terms of market cap with Rs 24.03 Arba. United Insurance has the lowest market cap of Rs 6.89 Arba.
Looking into the total market capitalization is a more accurate way of pricing of companies rather than market share price. This helps you to understand which companies are under priced and which are overpriced. Just because a company has a higher share price doesn’t mean it has larger market capitalization.
All other things (business volume, profitability, market share etc.) remaining same, you would be better off if you purchased the share of the company with lower market capitalization. Lower market value, in this case, means relatively under priced as compared to its competitors.