Life Insurance Corporation (LIC) of India acquired nearly half of the 63.16 crore-shares offered in the Coal India (CIL) auction on Friday – the biggest equity offering in India’s capital markets. The insurance behemoth purchased 28.47 crore shares, valuing the investment in the state-owned coal mining company at over R10,192 crore at a clearing price of R358 per share, as per stock exchange disclosures.
LIC’s stake in the Kolkata-based PSU now increased to 7.245% from 2.737% as on the quarter ending December 2014, data showed.
FE had reported that LIC had bought shares worth over R10,000 crore in the coal mining company. Foreign funds were estimated to have bought CIL shares worth R6,500-7,500 crore ($1.0-$1.2 billion) with one large foreign institution placing a bid of $350-400 million, sources familiar with the development had told FE.
In addition, State Bank of India (SBI) and various state-owned as well as private sector banks also lapped up shares in the CIL share sale, as did domestic and private-sector insurance companies and mutual funds.
Retail investors bid shares worth R2,000-2,100 crore. Stock exchange data on Friday showed the share sale was subscribed 1.07 times. The auction saw 67.52 crore shares bid as against 63.16 crore shares on offer. The share sale was subscribed 0.51 times as on 2:25pm IST and just 0.3 times as on 1:45pm IST, exchange data showed. The government is assured of at least R23,000 crore by selling 10% stake in CIL.
LIC has featured as the single-biggest investor in many PSU auctions in the past. In December 2014, LIC acquired more than 72% of the shares offered in Steel Authority of India (SAIL) auction. SAIL’s 5.82% stake sale (first-tranche) in March 2013 also saw LIC acquire nearly 70.6% of the shares on offer and more than two-thirds of the shares offered in the second tranche of Hindustan Copper’s (HCL) disinvestment in July 2013.
FE had also reported that the government would need LIC’s support to meet its ambitious FY15 target of R58,425 crore. Anticipating the requirement for the big-ticket sales, LIC gradually started to pare stake from its equity portfolio. BSE filings showed that LIC sold 1 crore shares (0.42% equity) in Axis Bank last month via 12 open-market executions at a combined sell value of R469.7 crore.
Domestic institutional investors (DIIs), in November, had turned net sellers to the tune of R7,826 crore in Indian equities – the biggest monthly outflow since March 2014 – with a large part of it coming from the insurance behemoth.
The Centre is now planning to sell shares in Power Finance Corporation (PFC), Rural Electrification Corporation (REC), Bharat Heavy Electrical (BHEL), Indian Oil (IOC), National Aluminium (Nalco), NMDC and MOIL among others.