Lic Housing Hardens On Pie Sale Buzz

The share price of LIC Housing Finance (LICHF) today firmed up on rumours that its parent Life Insurance Corporation of India (LIC) is likely to disinvest its equity stake in the company.

On the Bombay Stock Exchange, the counter witnessed a volume of 11.16 lakh shares changing hands. The stock hit a high of Rs 83 in intra-day trades and closed lower at Rs 80.90, up 12.55 per cent. On the National Stock Exchange, the counter witnessed a volume of 13.16 lakh shares.

According to dealers, the market grapewine is that LIC is likely to divest its stake in the company. As per market buzz, Corporation Bank is showing interest in acquiring the stake in LICHF. The rationale behind LIC's planned stake sale is that the housing finance business does not synergise with its core business of insurance.

Meanwhile, analysts said, "Another reason driving the scrip is its re-rating in the market vis-a-vis the Housing Development Finance Corporation." Analysts said that Budgetary measures in the home finance segment have just met expectations. The market had already taken into account the announcements and, therefore, the current jump in the LICHF share is not because of Budgetary sops.

The Union finance minister in the Budget had announced that the National Housing Bank (NHB) will launch a Mortgage Credit Guarantee Scheme, which would be provided to all housing loans thereby fully protecting lenders against defaults.

This will make housing credit more affordable, thereby, also increasing access to housing credit in rural areas. Consequent to the amendment to the National Housing Bank Act, NHB has commenced securitisation of housing loans and is operationalising foreclosure of mortgages. The housing scheme is proposed to be increased to 2.25 lakh for 2002-03, up from 1.7 lakh in the current year.

About 1 lakh units have already been financed up to December 2001. The allocation of the Indira Awas Yojana is being increased by 13 per cent to Rs 1,725 crore for 2002-03.