LIC buys IFCI stake in finance arm

The Life Insurance Corporation of India (LIC) has bought out IFCI's 4.39 per cent shareholding in LIC Housing Finance Ltd for Rs 90 crore.

LIC is also looking at the possibility of enhancing its stake further in the company through open market operations.

A top LIC executive said the block deal was executed on Monday.

"The idea was to buy out the entire stake of IFCI in due course. This move has enhanced LIC's stake in the housing finance firm to 39.06 per cent from 34.69 per cent," he said.

IFCI had in June 2004 held around 11 per cent in the housing finance company, a stake that declined to 4.39 per cent gradually.

"We have in the past bought out the holding of companies like the Unit Trust of India and other major holders who intended to offload their stake in the market. The IFCI deal has been similar in nature which would allow the LIC to enhance its holding in the company," the executive said.

LIC Housing Finance had enhanced its capital base to around November last year through a global depository receipts issue, whereby an additional one crore shares were floated.

This saw LIC's stake decline to around 34 per cent from 38.5 per cent in March 2004.

According to sources, LIC was looking to gain absolute majority in the company. This, they said, would be effected through open market purchases as well as block deals of a similar nature.

Meanwhile, foreign institutional investors (FIIs) such as T Rowe Price Associates Inc has sold 4 per cent of the company's stake. As of March 31, 2005, mutual funds and FIIs held around 13.63 per cent, while banks, financial institutions and state governments hold another 11.56 per cent.

FIIs hold a total 23.76 per cent in the company. The largest chunk among these as on March 31, 2005, was held by Goldman Sachs Investments "" 5.36 per cent. The Bank of New York held around 5.04 per cent, while Templeton Mutual Fund had 7.44 per cent.