LIC Housing: Equity infusion would be preferred over debt capital

At 12 per cent tier-1 capital, the recent decision to raise Rs 50,500 crore of debt funds unlikely to address asset quality issues

LIC Housing Finance on Wednesday revealed that it would raise about Rs 50,500 crore of bonds that would be classified as tier-2 capital instruments. Unlike equity, bonds carry a fixed repayment obligation, and hence, it is imperative that the money is deployed towards expanding loan assets so it provides returns.

Considering LIC Housing’s loan growth of 6 per cent year-on-year (YoY) in the June quarter (Q1), which significantly lagged market leader HDFC’s 11 per cent YoY growth, loan book expansion could remain choppy till there is an overall revival in the housing sector.