Stock exchanges examining preferential share issue to parent company, says LIC Housing Finance

The housing finance arm of state-run Life Insurance Corp, LIC Housing Finance, on Saturday said stock exchanges are examining its proposal of preferential allotment of shares to the parent company. In June this year, LIC Housing Finance had informed that LIC will infuse equity capital of about Rs 2,334.70 crore in the subsidiary by picking up an additional stake.

LIC Housing Finance (LIC HFL) fixed the issue price for the shares at Rs 514.25 apiece to its promoter Life Insurance Corporation of India (LIC) on a preferential basis. The company has, vide an email dated July 16, 2021, from BSE India Limited and National Stock Exchange of India Limited, received information the said preferential allotment is under examination by the exchanges, LIC Housing Finance said in a regulatory filing.

"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 in the filing.

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The company said, in compliance with the directions of the stock exchanges, it will not made public the voting results. The same shall be kept in a sealed cover pending the completion of examination by the relevant authorities, it said.

"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," said the housing financier.

The company's EGM is scheduled for Monday, July 19, for the matter of preferential allotment of shares to LIC to be taken up for the approval of shareholders. LIC Housing Finance said it received email from BSE and NSE on July 12, 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.

It said the company had provided the clarification that "there is no violation of the provisions of AOA as the price has been 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".

The latest email of July 16 from the stock exchanges also sought further clarifications on why valuation report of a registered valuer has not been considered while determining the price of such shares proposed to be issued on preferential basis, it added.

"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," it said further. Under the issue, LIC Housing Finance will allot 4,54,00,000 shares to Life Insurance Corporation of India (LIC).

"The issue price of the equity share of the face value of Rs 2 each shall be Rs 514.25 apiece, which is the price calculated as per Sebi regulations, 2018," LIC HFL said in June.

The matter assumes significance as the PNB Housing Finance's proposed Rs 4,000 crore capital infusion in lieu of preference shares to investors led by US based Carlyle group has come under the scanner of the capital market regulator and the matter has now reached the Securities Appellate Tribunal.