LIC Housing Finance, the country's second largest housing finance company, is planning to raise up to Rs 500 crore through preferential issue of shares to LIC and qualified institutional placement, to beef up its capital adequacy ratio.
"We would like our capital adequacy ratio to be around 10-12%," said VK Sharma, chief executive of LIC Housing Finance.
"The company's capital adequacy ratio is at 8.6% at the end of December 31, 2011. We are exploring various options."
A senior executive of the company, on condition of anonymity, said Life Insurance Corporation of India, the parent company of the lender, has given its in-principle approval for the preferential allotment of shares. This won't reduce LIC's share in the subsidiary. LIC currently holds 36.5% in the company.
The company may start the process of raising tier-1 capital this financial year to support its business growth over the next fiscal year. It expects a growth of 20% during the fourth quarter.
While the company will borrow Rs 8,000 crore this quarter, it plans to borrow another Rs 25,000 crore during the next fiscal year.
"We have a plan of raising Rs 24,000 crore to Rs 26,000 crore next fiscal year. (This year) we have raised Rs 15,000 crore and will borrow another Rs 8,000 crore in this quarter," said Sharma. Amid the economic slowdown, business for housing finance companies is slow.
But LIC Housing Finance has changed its focus towards end-users or retail mainly. In an interview to ET, Sharma said the company is focusing on middle-class customers and project finance in the last quarter of the year.
The bonds to loans ratio for the lender is 65:35. The company plans to raise funds through bonds rather than borrow from banks.
Source: www.economictimes.com
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Gaurav Agarwal
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DENIP Consultants Pvt Ltd
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