The second-largest owner of public sector bank (PSB) shares after the government, Life Insurance Corporation of India (LIC), continues to increase its stake in PSBs.
The second-largest owner of public sector bank (PSB) shares after the government, Life Insurance Corporation of India (LIC), continues to increase its stake in PSBs. Since the beginning of 2016, LIC has brought into preferential allotment of as many as six banks, supporting the fund-raising requirement of these banks in turn.
Share prices of PSBs on an average have declined close to 11.7% so far this year as disappointing Q3FY16 numbers have weighed down on their performance.
While the state-run insurer bought the preference shares of Bank of India, Corporation Bank, Allahabad Bank, Indian Overseas Bank and Oriental Bank of Commerce in 2016 so far, it bought preference shares of IDBI Bank on Monday and will be soon buying preferential shares of Dena Bank too.
LIC on Monday increased its 7.21% stake in IDBI to 14.37%, buying 29 crore shares in the bank. While Dena Bank on Wednesday announced that in its general meeting, shareholders had approved of allotment of up to 2 crore preferential shares to LIC for a cash issue price of `29.92 per share including premium of Rs 19.92 per share aggregating up to `64.86 crore. Once the allotment is done, LIC’s stake in Dena Bank will increase from 11.63% to 14.99%.
A senior LIC official on condition of anonymity had earlier told FE that while PSB stocks may have performed poorly in the last few months, over a longer horizon of five to seven years, the investments made sense. “If we see a dip share prices and find enough value, we won’t hesitate to buy,” the executive said. Twelve of the state-owned lenders have posted a collective loss of Rs 13,562 in the quarter ended in December 2015.