LIC Housing Finance: Stock exchanges examine issue of preferential shares to parent company

By Angel Broking | Published on 20th July 2021 | 21

LIC Housing Finance: Stock exchanges examine issue of preferential shares to parent company

LIC Housing Finance, a subsidiary arm of Life Insurance Corporation, said that stock exchanges are currently looking into the issue of preferential shares to the parent company. This news came after the company announced that LIC would issue equity capital worth Rs. 2334.70 crores by upturning additional stakes.

That’s not all!

LIC Housing Finance received information regarding examination of such preferential shares by stock exchanges on 16 July 2021. Read on to find out more.

What’s the stir all about?

The housing finance arm of LIC approved preferential share allotment on 15 June 2021 through private placement.

LICHF will further obtain approval from shareholders for this preferential share issue during its EGM on 19 July 2021.

Moreover, BSE and NSE are ardently examining preferential share allotment to LIC Housing Finance. Stock exchanges have further asked this subsidiary company to not release the voting results by shareholders regarding the preferential allotment during its EGM (Extraordinary General Meeting).

Clarifications regarding compliance with provisions of AOA

On 12 July 2021, this housing finance company received an email from BSE and NSE.

The stock exchanges sent this mail seeking clarification regarding compliance with the provisions of AOA (Articles of Associations).

The said clarifications of LICHF are regarding valuation process at which these equity shares are offered to Life Insurance Corp.

What does the company have to say concerning the above clarifications?

LIC Housing Finance further clears that there are no violations regarding Provisions of Articles of Associations.

This is because the price of equity shares is determined in accordance with the Companies Act, 2013 and relevant provisions of the AOA. The company further mentioned that the price is acknowledged concerning Issue of Capital and Disclosure Requirements Regulations, 2018 by SEBI.

Clarifications regarding valuation report

LIC Housing Finance received yet another email on 16 July 2021. The BSE and NSE were seeking clarifications regarding the valuation report with it. Stock exchanges questioned the company about ignorance in consideration of registered valuer when determining price of preferential shares.

What is LICHF’s clarification regarding the valuation report?

Concerning this question, LICHF mentions that the allotment price is done according to AOA, Companies Act, 2013, and SEBI regulations, 2018.

LIC Housing Finance further mentions that it does not require obtaining a Registered Valuers Certificate. This is because it is a listed company under Rule 13 (Share Capital and Debentures Rules), 2014.

Furthermore, LIC Housing Finance also received another direction from BSE and NSE. This direction was regarding EGM voting. The stock exchanges said that this company might conduct its EGM voting. However, LICHF should not release Agenda item no. 1 voting results in public and must seal the same until completion.

Agenda no. 1 relates to preferential share allotment. This subsidiary body said that it will use equity raised from such shares:

  • To meet long term capital requirements for business growth
  • To increase lending capacity of the company
  • For typical corporate purposes

Bottom line

LIC Housing Finance is currently in consideration of all options regarding the said allotment. The company has also maintained all the compliances as set by the stock exchanges. This subsidiary body is looking forward to attaining resources for business growth through the said issue of preferential shares.

 

Frequently Asked Questions

  1. What is the face value of LIC Housing Finance equity shares?

The face value of such shares is Rs. 2 each.

  1. How much will LIC’s stake increase in the company?

After this allotment, LIC’s stake will increase from 40.313% to 45.24%.

  1. What is the issue price of equity shares for this proposed preferential allotment?

The issue price of such shares is Rs. 514.25 per share.