Lic To Pick 20% Stake In Corpbank Securities
The Life Insurance Corporation of India (LIC) will pick up a 20 per cent stake in CorpBank Securities, a primary dealership promoted by the Mangalore-based Corporation Bank. The share capital of the company will increase from Rs 100 crore to Rs 125 crore, with LIC putting in Rs 25 crore towards the capital.
The pricing of the 20 per cent stake is under discussion between the two partners. LIC has decided to invest up to Rs 50 crore in the primary dealership arm of the bank, which would include a premium for acquiring a block of 20 per cent equity in the company.
Both LIC and Corporation Bank have undertaken independent valuations of the primary dealership. UTI Securities did the valuation for LIC, while Deloitte, Haskins and Sells did it for Corporation Bank.
LIC and Corporation Bank declined to reveal the price at which LIC would pick up the stake. However, LIC's managing director A Ramamurthy said the valuation exercise looked into various parameters, including the book value, earnings per share, the price earning multiple and valuation of future profits.
"Technically, we can go up to 30 per cent, but we have decided to cap the investment at 20 per cent so that we can avoid having to approach the Insurance Regulatory and Development Authority to ask for an exemption from the investment norms," said Ramamurthy. As per the IRDA norms, investment by insurance companies in entities is limited to 20 per cent.
At the time LIC decided to increase its investment in Corporation Bank to 27 per cent, it was forced to seek IRDA approval since the investment exceeded the norms.