The Hindu Business Line : LIC Housing plans Rs 400-cr pref issue

Working out strategies: Mr S.K. Mitter (left), Director and Chief Executive, LIC Housing Finance Ltd, and Mr R.P. Shankara Raju, Regional Manager, Bangalore, addressing a press conference in Bangalore on Monday. —

Our Bureau

Bangalore, Nov. 19 LIC Housing Finance Ltd proposes to raise Rs 400 crore of equity funds through a private placement this fiscal in January. The Director and Chief Executive, Mr S.K. Mitter, told presspersons here on Monday “We are working on the modalities and hope to obtain a favourable pricing for the issue.”

The proposal involves issue of 1.2 crore equity shares on a preferential basis.

Mr Mitter said that the company hoped to obtain about 10 per cent premium to the six-month average price of the scrip. The scrip closed on Monday at Rs 373.85, up Rs 15.40 over the previous close. Its 52-week high was Rs 389.35.

Initially, LIC Housing Finance had proposed tapping the qualified institutional placement route. This has now been substituted with the preferential allotment. Once the placement is completed, the capital to risk weighted asset ratio would rise to 21 per cent from the current level of 17 per cent. The stakeholding would though remain in tact, after the placement, he said.

Insurance behemoth Life Insurance Corporation of India currently holds 40.5 per cent stake in LIC Housing Finance’s paid-up equity of Rs 85 crore.

Mr Mitter said that the company had targeted raising Rs 7,000 crore through issue of bonds. So far this year, it has raised Rs 2,600 crore and the rest would be raised during the course of the year.

Further, the company is also stepping up its resource raising efforts. It is pushing its fixed deposit programme, by offering 9 per cent on three-year deposits and 9.25 per cent on five-year funds. But the funding is likely to add to the cost of working funds.

Bond pricing

Mr Mitter said LIC Housing Finance’s bond placements during the last few months were all priced upwards of 9 per cent. As a result, the average cost of working funds were in the region of about 8.65 per cent. However, it was able to realise an asset yield of 10.3 per cent, translating to an average spread of 1.65 per cent.

The company has extended its retirement home venture through its subsidiary, LICHFL Care Homes Ltd, to four other cities after its success in Bangalore. This year, LIC Housing Finance is aiming to bring down its non performing assets ratio to one per cent from the current level of 2.84 per cent. It has already issued 15,000 notices to defaulters. At least in 40 per cent of the cases, borrowers have opted for settlements, he added.

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