LIC Housing Finance has approached the Securities Appellate Tribunal over the company’s preferential allotment of shares to its parent Life Insurance Corporation of India (LIC).
Earlier this month, it was asked by stock exchanges BSE and National Stock Exchange of India to clarify on compliance with the Provisions of Articles of Association (AOA) on the process for the valuation of the shares offered to LIC.
LIC Housing Finance said in a stock market filing that the verdict of SAT is expected soon, which may put these issues at rest. This comes even as a decision by Punjab National Housing Finance to preferentially allot ₹3,200 crore worth of shares and ₹800 crore worth of warrants to a bunch of investors, including private equity firm Carlyle, has been blocked by SEBI. The market regulator said the notice given by PNBHF on May 31 for an Extraordinary General Meeting to approve the stake sale is “ultra-vires of Article of Association (AoA)”.
LIC Housing Finance’s deal
In the case of LIC Housing Finance, the company has offered 4.54 crore equity shares at ₹514.43 per share with an issue size of ₹2,335.51 crore. At the EGM on July 19, LIC Chairman MR Kumar explained the need and rationale for the “confidence capital raising and how the said capital raising is important in this Covid-19 scenario, which is expected to have a positive impact on the minority shareholders.”
Awaits Tribunal signal
“The voting by shareholders will not be made public and it will be kept in a sealed cover pending the completion of examination by the relevant authorities,” LIC Housing Finance had said in a regulatory filing on July 17.
LICHF had also stressed that it has fully complied with the applicable provision for valuation of the equity shares offered to LIC on a preferential basis.
JN Gupta, founder, SES, a shareholder advisory firm that had first flagged concerns over the PNBHF-Carlyle deal, said, “In the limited sense, the developments at PNB Housing Finance and LIC Housing Finance are the same, that is as far as requirements of AOAs require a valuation report. In all other aspects, the two are different cases. In the case of LIC Housing Finance, the shares are being issued at a premium. They are being issued to LIC, which is a government company. The share-dilution is very little, there is no change of control and minority shareholders are not being short-changed,” said JN Gupta, founder, SES, a shareholder advisory firm.