LIC Housing Finance (LIC HF), the home finance subsidiary of Life Insurance Corporation of India (LIC), plans to raise additional capital of Rs 500 crore though qualified institutional placement (QIP) and preferential issue of equity shares.
The company needs the capital to support business growth for two financial years. “The board will meet on June 1 to consider the proposal to raise additional capital. Then, we will seek the shareholders’ nod,” LIC HF Director and Chief Executive RR Nair said.
QIP is the private placement of equity shares, which can be converted into equity by a listed company, with qualified institutional buyers approved by the market regulator.
While foreign institutional investors hold 21.61 per cent stake, LIC holds a 40.84 per cent stake in the company. The remaining is held by the public. At present, the capital adequacy ratio (13.5 per cent) is above the minimum regulatory norm. But the company wants to be in a comfortable position to grow the loan portfolio, he said.
The plan is to raise the capital before September 2009, depending on shareholders’ nod and market conditions. Its stock closed higher at Rs 446.85 on the Bombay Stock Exchange (BSE) as against the previous close of 427.90.
Besides share capital, HFC has headroom to raise Tier-II capital up to Rs 500 crore. Elaborating business plans for 2009-10, Nair said he expects the loan book to grow at 25-30 per cent. The company’s outstanding mortgage portfolio as on March 31,2009, was Rs 27,679 crore, up 26 per cent as against Rs 21,936 crore reported in the same period a year ago.
It has raised about Rs 2,000 crore through a range of instruments, including commercial paper, till date in 2009-10. Total market borrowings were estimated at Rs 15,000 crore for FY10, Nair added.