Page 10 - Insurance Times August 2018
P. 10
IDBI to move Govern- LIC Housing Finance loans shall come with term insur-
ment to make LIC pro- ance cover
moter
LIC Housing Finance is going to launch a new home loan product with a low-
The board of IDBI Bank approved a cost term insurance. It plans to price this term
proposal to seek the government's cover competitively, in order to differentiate its
approval to allow LIC as a promoter home loan from rivals.
once it acquires majority stake in the
bank. LIC Housing Finance MD & CEO Vinay Sah said
In a notification, the bank said that that the term insurance would also provide additional security to the company.
it has received communication from In addition to the bundled product, the LIC Housing Finance will also offer regu-
LIC expressing interest in acquiring lar home loan borrowers - including existing borrowers - the option to partici-
51% controlling stake in the bank, pate in a group protection policy. "The premium will depend on the age of the
through preferential allotment of borrower, but there will be a uniform table of rates across ages for all custom-
shares or an open offer. ers," said Sah.
"So, largely the three things to look
into are expression of interest by LIC The difference between the group cover and the bundled product is that in the
taking a 51% controlling stake, to latter there would not be any separate premium collected. According to Sah,
give them promoter status and to the company aims to grow its loans by differentiating its products and by in-
decide upon mode of infusion creasing market reach. "Our home loans start at 8.35% in line with the best
whether by way of preferential rates," he said.
shares or through an open offer,"
said B. Sriram, managing director Exposure to PSUs may hurt LIC's returns
and chief executive officer, IDBI
Bank. "LIC will get management con- Bailing out public sector companies has led to under-performance of Life Insur-
trol post the deal," he said. ance Corporation (LIC)'s equity portfolio, according to
The board of LIC also approved a a report by Business Standard. The country's largest
plan to increase its stake in the bank insurer has not been able to beat the benchmark BSE
to 51%. It now holds around 7.5% Sensex index. Since March 2012, the value of LIC's eq-
stake in IDBI Bank. LIC will buy the uity portfolio has risen around 65 percent even as the
remaining stake from the govern- Sensex doubled during the same period.
ment, department of economic af-
fairs secretary, Subhash Garg said. Similarly, the combined market capitalisation of LIC portfolio companies has risen
"The banking regulator's nod will be 103 percent, whereas the BSE-500 index has surged 115 percent in six years,
needed for change in promoter sta- the report suggests. According to the report, LIC's stake in state-owned com-
tus, acquisition of more than 10% panies has risen from an average of 5.5 percent in March 2012 to 7.7 percent
stake, and fit and proper status," in March this year. The insurer's stake in non-bank PSUs has risen from 4 per-
Sriram said. "There is no specific cent to 7.4 percent in the same period.
timeline for the stake sale process to
be completed." The combined market capitalisation of these PSUs was up 25 percent in the six-
year period, while the combined market capitalisation of the PSBs was up 29
percent. PSBs' share prices are down around 43 percent on average, which has
led to LIC making losses in its investments in such banks, the analysis suggests.
LIC is estimated to have made incremental investment of around Rs 685 billion
in all PSUs in the last six years, accounting to almost 48.5 percent of all new
stock exposure in the same period. The estimate is based on quarterly changes
in the LIC's shareholding in companies and their average quarterly share price,
the report suggests, according to the report.
At the end of the March 2018 quarter, LIC held more than 1 percent stake in
376 listed and actively traded companies. The stake was worth around Rs 6
trillion at the end of June, rising from Rs 2.8 trillion at the end of the March
2012 quarter. However, a large part of the increase in portfolio value is because
of incremental share purchases by the insurer in the period, the report adds.
10 The Insurance Times, August 2018
