Investment Management

Is free pricing of pubic issues are good or bad for investors

The answer depends upon whom we mean by “investors”?   Is investor the one who is already holding a share, that is, an existing shareholder, or one who is going to become a shareholder?   Unfortunately there has been some confusion in this regard.   To any reasonable person, it should be clear that is the existing shareholder who is the true investor since he has already invested.

Whenever a company makes a public issue of shares at a price, which is lower than the market value of the share, some part of the wealth gets transferred from the existing shareholder to the new shareholder.  … Read the rest

Abey Francis

Introduction to stocks and shares

Stocks or securities are generic terms that stand for instruments of ownership like shares, as well as instruments of lending like debentures, which are issued publicly.   Just as a share represents the smallest unit of ownership, a debenture or a bond represents the smallest unit of lending.   Shares and debentures may be of various kinds.

An ordinary share represents the form of fractional ownership in which a shareholder (one who holds ordinary shares), as a fractional owner, undertakes maximum entrepreneurial risk associated with a business venture.   This risk has several dimensions.   During the life of a business, in general, an ordinary shareholder receives dividends out of operating surplus.  … Read the rest

Abey Francis

Issue of a share at par and at a premium

In general, an ordinary share in India is said to have a par value (face value) of Rs.10, though some shares issued earlier still carry a par value of Rs.100.   Par value implies the value at which a share is originally recorded in the balance sheet as equity capital. Equity capital is the same as ordinary share capital. The SEBI guidelines for public issues by new companies established by individual promoters and entrepreneurs, require all new companies to offer their shares to the public at par, i.e. at Rs.10.   However, a new company set up by existing companies (and of course existing companies themselves) with a track record of at least five years of consistent profitability are allowed by the SEBI guidelines to issue shares at a premium.… Read the rest

Abey Francis

Features of Life Insurance Contract

Human life is an income generating asset. This asset can be lost through unexpected death or made non functional through sickness or disability caused by an accident. On the other hand there is a certainty that death will happen, but its timing is uncertain. Life insurance protects against loss.

Life insurance contract may be defined as the contract, whereby the insurer in consideration of a premium undertakes to pay a certain sum of money either on the death of the insured or on the expiry of a fixed period. The definition of the life insurance contract is enlarged by Section 2(ii) of the Insurance Act 1938 by including annuity business.… Read the rest

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Role and Importance of Insurance

Insurance has become an integral aspect in everyone’s life today. It is a written contract of insurance that offers protection against future loss. The life insurance generally helps to insure the life of people. A definite compensation is provided by the insurer to the insured person. The non-life insurance provides financial support to people or companies and helps them to overcome the losses. The basic human trait is to be averse to the idea of taking risks. There is always an urge to minimize the risks and provide protection against possible failure. The risk includes fire, the perils of sea, death, accidents and burglary.… Read the rest

Abey Francis

Insurance – Definition, Principles and Functions

Life is a roller coaster ride and is full of twists and turns. Insurance policies are a safeguard against the uncertainties of life. As in all insurance, the insured transfers a risk to the insurer, receiving a policy and paying a premium in exchange. The risk assumed by the insurer is the risk of death of the insured in case of life insurance. Insurance policies cover the risk of life as well as other assets and valuables such as home, automobiles, jewelry etc. On the basis of the risk they cover, insurance policies can be classified into Life Insurance and General Insurance.  … Read the rest

Abey Francis