State-run lenders depend on LIC to meet funding goals
MUMBAI: Even as state-run banks increasingly rely on equity markets for capital as government funds dry up, a closer look at the fundraising numbers shows Life Insurance Corp. of India (LIC), the state-owned behemoth, continues to be their biggest backer.
LIC has bought nearly a fourth of the ₹7,800 crore raised by five state-run banks by selling shares to institutional investors this fiscal.
The breakup of the subscription figures for their deals shows the role played by LIC in helping banks mobilize capital.
This year, LIC has committed almost 23% of the capital raised by the five state-run banks— Canara Bank, Punjab National Bank, Indian Bank, Bank of Maharashtra and Union Bank of India—data from stock exchange filings show. In almost all the deals, LIC was also the biggest institutional investor.
For instance, in the case of Bank of Maharashtra, LIC pitched in with 50% of the ₹403 crore that the bank raised through its qualified institutional placement.
While the amounts committed by LIC does not amount to a rescue, and some banks have managed to raise capital from a broad set of investors, industry experts said that almost all deals took off with LIC coming in as the anchor investor.
“These are not the typical bailouts that we have seen in the past, but in these, investors want to see an anchor investor, and there is no better option than to bring in LIC as the anchor,” said an investment banker, who did not want to be named.