Life Insurance Corporation (LIC) of India acquired 72.16% of the 20.65 crore shares on offer in the Steel Authority of India (SAIL) auction last Friday, coughing up Rs 1,241.15 crore based on the clearing price of Rs 83.5 apiece, stock exchange disclosures showed.
The insurance behemoth acquired nearly 14.87 crore shares (representing 3.6% stake) in the steel company, the stock exchange announcement showed. LIC’s stake in the New Delhi-based company has now rose to 12.73% from 9.13%.
State Bank of India (SBI) bid shares worth Rs 100-150 crore, sources in the investment banking industry said. Other prominent investors include ICICI Bank, Segantii Capital Management, General Insurance Corporation, and Geosphere Capital, along with several domestic and foreign investors.
This is not the first time LIC has rescued PSU stake sale. SAIL’s 5.82% stake sale (first-tranche) in March 2013 saw LIC acquiring nearly 70.6% of the shares on offer. The insurance company, in stock exchange notification, said it had purchased 16.96 crore shares from the total offering of 24.04 crore shares. LIC’s investment stood at Rs 1,068 crore, based on the floor price of Rs 63 apiece.
LIC also acquired more than two-thirds of the shares offered in the second tranche of Hindustan Copper’s (HCL) disinvestment in July 2013. LIC had bought nearly 44% in the first tranche of HCL’s offer in November 2012.
FE had earlier reported that the government would need LIC support to meet its FY15 disinvestment target of Rs 58,425 crore that includes ONGC, Coal India, NHPC and the residual stake sales in Balco and Hindustan Zinc, along with some shares of Axis Bank held by SUUTI.
Anticipating the requirement for the big-ticket sales, LIC gradually started to pare stake from its equity portfolio. Various BSE filings showed that LIC sold 1 crore shares (0.42% equity) in Axis Bank last month through 12 open-market executions at a combined sell value of Rs 469.7 crore.
Domestic institutional investors (DIIs), last month, turned net sellers to the tune of Rs 7,826 crore in Indian equities, with a large part of it coming from the insurance behemoth. Data also highlighted that November’s outflow was the largest since March 2014 when DIIs liquidated Rs 12,520 crore worth of Indian shares.
In the case of SAIL, the government was looking to sell 20.65 crore shares, constituting 5% stake, through the offer-for-sale (OFS) route at a floor price of Rs 83 per share. This was after the gas pricing issues and threat of strike by workers union prompted the Centre to revise its strategy for ONGC and Coal India auction, and instead begin with SAIL.
The Centre now plans to sell shares in Coal India, Power Finance Corporation (PFC), Rural Electrification Corporation (REC), ONGC and NHPC in the last quarter of FY15. Achieving this year’s disinvestment target is crucial from the point of view of reaching the 4.1% fiscal deficit target presented in the Union Budget. Whether the government achieves the target is yet to be seen, but it would need every bit of LIC strength to close the gap.