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Stock exchanges examining LIC Housing Finance's preferential share allotment to LIC

Stock exchanges examining LIC Housing Finance's preferential share allotment to LIC

Last month, LIC Housing Finance had said it would issue 4.54 crore shares through preferential allotment to LIC at an issue price of Rs 514.25 per share.

LIC Housing Finance said it has fully complied with the applicable provision for valuation of the equity shares offered to LIC on a preferential basis. LIC Housing Finance said it has fully complied with the applicable provision for valuation of the equity shares offered to LIC on a preferential basis.

Stock exchanges BSE and NSE are examining LIC Housing Finance's preferential allotment of over 4.5 crore equity shares to its promoter, Life Insurance Corportaion of India (LIC), and have asked the company to not make public the result of voting by shareholders on the preferential allotment during its extraordinary general meeting (EGM).

Last month, LIC Housing Finance had said it would issue 4.54 crore shares through preferential allotment to LIC at an issue price of Rs 514.25 per share. This would lead to infusion of equity capital of Rs 2,335 crore and increase LIC's stake in the company to 45.24 per cent from 40.31 per cent.

"The company had received an email dated 12 July, 2021 from, BSE Limited and, National Stock Exchange of India Limited seeking clarifications on compliance with the Provisions of Articles of Association (AOA) of the company regarding process arrived for the valuation at which the said equity shares are offered to LIC," LIC Housing Finance said in a regulatory filing.

The company said it had provided clarification that there was no violation of the provisions of AOA as the price was duly determined in accordance with the relevant provisions of the AOA as well as the Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

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Through another email dated July 16, the exchanges sought further clarifications on why valuation report of a registered valuer was not considered while determining the price of such shares proposed to be issued on preferential basis.

"The company had again reiterated that, the price for the preferential allotment has been arrived at in compliance with the provisions of AOA, the Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 as the company being a listed company is not required to obtain a registered valuers certificate as provided under Rule 13 of the Companies (Share Capital and Debentures) Rules, 2014," LIC Housing Finance said.

Through another email on the same day, the exchanges told LIC Housing Finance that the preferential allotment was under examination by the exchanges, the filing said.

"It has further received a direction from the said exchanges that 'in the interest of investors in the securities market, the voting in the EGM may be carried on. However, the results of the voting on agenda item no. 1 may not be made public and the same shall be kept in a sealed cover pending the completion of examination'," it said.

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Agenda no. 1 pertains to the preferential allotment of shares to LIC. LIC Housing Finance had said that the proceeds from preferential share allotment will be primarily used to meet the needs of the growing business of the company, including long term capital requirements for pursuing growth plans, to increase the capacity of the company to lend, and for general corporate purposes.

LIC Housing Finance said that in compliance with the directions of the stock exchanges, the results of the voting on the said agenda item will not be made public and the same shall be kept in a sealed cover pending the completion of examination by the relevant authorities.

"The company is considering all its option regarding the said matter and we would like to categorically state the company has fully complied with the applicable provision for valuation of the equity shares offered to LIC on a preferential basis," it said in the filing.