LIC rescues RCF share auction

The insurance behemoth bought 46%, or 31.63 mn of the 69 mn shares during the offer for sale last week

 

State-owned Life Insurance Corporation of India (LIC) has once again played the role of a white knight for the government’s divestment process — this time coming to the rescue of the share auction of Rashtriya Chemicals and Fertilizers (RCF).

The insurance behemoth bought 46 per cent, or 31.63 million of the 69 million shares during the offer for sale (OFS) last week.

Earlier, it had made more than half the bids in the OFS of Oil and Natural Gas Corporation.

“We have not bailed out anyone. We have examined this (RCF) issue by its own strength and then taken a decision to participate. We will examine the future issues in a similar manner and then take a call,” D K Mehrotra, chairman of LIC, told Business Standard on Wednesday.

However, an investment banker said LIC was “asked to keep the powder dry” for the RCF offering. “As the share sale was not even half-covered an hour before the close of bids, LIC had to put in a large-ticket application,” he said, requesting anonymity.

After the OFS, LIC now holds 6.69 per cent stake in RCF, compared with 0.96 per cent earlier. The shares of RCF on Wednesday closed at Rs 43.1, about four per cent below their OFS price of Rs 45 per share.

Investments made by LIC are typically for the long term but the mark-to-market losses on LIC's investments in the RCF share auction stand at Rs 6.2 crore.

The government had raised about Rs 310 crore by divesting its 12.5 per cent holdings in RCF through the OFS route on March 8. The 69-million share auction was subscribed 1.3 times and the bulk of the bids had come at Rs 45.02 a share, as against the minimum offer price of Rs 45 a share.

Last year, LIC had bought 377 million shares (88 per cent) of the 427 million shares on offer during the ONGC share auction, part of last year's disinvestment programme. Earlier this year, in the Hindustan Copper OFS, the government-led insurer had to pick up 22.5 million shares.