LIC Housing eyes Rs 200cr via GDRs

Needs additional Rs 1,200-1,500cr to meet demand

LIC Housing Finance proposes to raise Rs 200 crore through global depository receipts (GDRs) early next year to augment its capital resources.

LIC Housing, the second largest housing company after HDFC, needs to raise an additional Rs 1,200-1,500 crore to meet its total fund requirement.

However, the housing finance arm of the Life Insurance Corporation of India (LIC) does not wish to leverage any further loans from the state insurer.

Director and CEO S C Jain said: "We are not applying to LIC for further loans as we would like to adopt multiple credit lines." It is, however, actively in talks with LIC to bring down the rate of interest on existing loans from the current 8.75 per cent.

Loans from LIC account for 40 per cent of the housing finance arm's total borrowings. It had borrowed Rs 3,400 crore for a tenure of 8 to 10 years. The company has informed BSE that its board will meet on December 23 in respect of issuance of fresh equity shares to enhance its share capital base.

While it is looking at various options, merchant bankers have advised that GDR will be a better option as it will attract a better class and larger number of investors, Jain said.

Should LIC Housing opt for a preferential issue of shares, this would result in foreign entities discounting the price by 15 per cent in their books on account of the one-year lock in period, said Jain. "We can get a far more competitive price if we opt for the GDR," he added.

LIC Housing proposes to issue one crore shares of Rs 10 each at a premium. "At the current market price, this should fetch us Rs 200 crore," said Jain. LIC Housing stock closed today at Rs 198.85 on the Bombay Stock Exchange.

The housing finance company had initially required a sum of Rs 2,500-3,000 crore, of which it has to raise a balance of about Rs 1,500 crore. In May 2003, LIC Housing raised external commercial borrowings (ECBs) to the tune of $ 50 million.

In addition to the proposed GDR issue, LIC Housing is looking at raising Rs 1,300 crore from non-convertible debentures. The process of listing these NCDs is being undertaken and the entire amount will be raised through a book-building process, Jain said.

This along with the ECBs already raised, will help the housing finance company meet its requirements towards disbursement of loans. For fiscal 2004 LIC Housing is targeting business growth of about 50 per cent and an income and net profit growth of 20 per cent.

The company is planning to focus more on recoveries and plans to set up a special cell for the same. It has also targeted net non-performing asset ratio of below 2.5 per cent by the year end.

Today, LIC Housing has 18 per cent market share in the housing finance industry.