LIC has lost ₹17,000 crore in PSBs in a year; mergers could worsen erosion

[timmy]

LIC has lost ₹17,000 crore in PSBs in a year; mergers could worsen erosion

Radhika Merwin  | Updated on September 04, 2019  Published on September 04, 2019

 

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Why PSB stocks can continue to fall post bank merger plans

 

Centre’s big bank merger move would only hurt the insurer more in the coming months

BL Research Bureau

LIC, that has seen its investment in IDBI Bank (classified as a private bank now) erode by more than half over the past year or so, has also seen the value of its investments in other PSU banks plunge. The sharp fall in the price of PSU bank stocks and dilution of its stake owing to capital infusion by the government, has eroded its wealth in these banks. LIC has lost over Rs 17,000 crore of its wealth in PSBs over the past year. Excluding IDBI Bank, it has lost over ₹4,800 crore in other PSBs.

The Centre’s big bank merger move would only hurt the insurer more in the coming months. A sharp 20-30 per cent dilution in the book value of the merged entities — PNB, Canara Bank, Union Bank and Indian Bank — over the next year or so, will lead to LIC’s value of holdings in PSU Banks erode further.

Infusion at abysmal valuations

The government infusing capital year after year into public sector banks, has eroded value for investors. This is because most PSU banks trade at a steep discount to their book value, and hence the government infusing capital at such low valuations, immediately leads to dilution in equity base.

In FY19, the Centre infused ₹1.06 lakh crore into banks, most of which were trading at 0.4-0.6 times their book value. The dilution in book value owing to the government’s capital infusion has hurt minority shareholders including LIC.

For instance, in case of Corporation Bank, the government infused ₹11,641 crore in FY19. For this, it was allotted shares in the bank in two tranches — 86.9 crore shares at ₹29.4 each in October 2018 and 340 crore shares at ₹26.68 in March 2019. The book value of the bank in the December 2018 quarter stood at ₹54.9 (as per the bank’s presentation) — double that of the price at which shares were issued.

Read more: To improve liquidity, ₹ 70,000-cr capital to be infused into public sector banks

LIC that was holding 13 per cent stake in Corporation Bank as of June-Sept 2018 (before the infusion) saw its stake in the bank fall to just 3.6 per cent by end of FY19. The huge dilution in its stake alongside a sharp fall in stock price during this period, led to substantial fall in its value of holdings.

Again, in the case of Oriental Bank of Commerce, LIC’s stake has fallen from 7.4 per cent last June to 3.4 per cent currently. The government had infused about ₹6,600 crore into the bank in FY19.

Over the past year, price of many PSU bank stocks have plummeted 20-40 per cent. Dilution owing to government’s capital infusion has further eroded LIC’ wealth in these banks.

In the recently announced PSU bank mergers, LIC could again lose wealth in these banks. This is because, there could be a sharp 20-30 per cent dilution in the book value of the resultant merged entity. LIC is among the minority shareholders that holds stakes in these PSU Banks — in PNB for instance, LIC owns 7.3 per cent stake, while in Union Bank, it holds 6.4 per cent stake.

Post merger, LIC’s stake in these banks could come down significantly to 3-5 per cent.

IDBI Bank debacle

LIC had stepped in to bail-out IDBI Bank last fiscal, infusing a massive amount of ₹21,624 crore and acquiring 51 per cent stake in the bank. With the current price of IDBI Bank less than half the price at which LIC was allotted shares in the bank (₹60-61), the insurer has already lost over half of the value of its investments.

Also read: Why LIC-owned IDBI Bank's troubles are far from over

Owing to rise in slippages and huge provisioning, IDBI Bank’s Tier-1 capital ratios fell sharply in the June 2019 quarter, failing to meet the RBI’s regulatory requirement.

LIC has stepped in once again to bail out the ailing bank by committing to infuse ₹4,743 crore. Another ₹4,557 crore would be pumped in by the government, which holds about 46.5 per cent in IDBI Bank currently.

The ₹9,300 crore capital infusion into IDBI Bank, which trades at a sharp (0.5 times) discount to its book value, would lead to about 10 per cent dilution in the book value, hurting LIC.

If IDBI Bank continues to underperform and requires further capital infusion in the coming months, the pain would only accentuate for the largest life insurer.

 

Published on September 04, 2019

https://www.thehindubusinessline.com/money-and-banking/lic-has-lost-over-rs-17000-cr-of-wealth-in-psu-banks-since-june-quarter-last-year/article29330300.ece

 

 

 

[Hitman]

LIC ని MG చేయవద్దు రా.. కోట్ల మంది దాంట్లో జీవితాలు పెట్టారు 

[timmy]

9 minutes ago, Hitman said:

LIC ని MG చేయవద్దు రా.. కోట్ల మంది దాంట్లో జీవితాలు పెట్టారు 

already starat aiyyindhi

 

LIC has lost more than Rs 20,000 crore in just 5 PSU stocks Modi govt made it buy in 2 yrs

India’s largest life insurer LIC has assets of over Rs 31 lakh crore. But value of its investments in firms like New India Assurance, HAL & IDBI Bank has halved.

REMYA NAIR Updated: 24 September, 2019 11:25 am IST

The Life Insurance Corporation of India headquarters in Mumbai | Photo: licindia.in

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New Delhi: The Life Insurance Corporation of India has often ended up being the lender of last resort to the government.

But some high-profile and large investments made by LIC in the stocks of state-run companies in recent years have eroded in value, even though stock markets overall have grown during this period, an analysis by ThePrint has found.

LIC’s investment in initial public offerings (IPOs) of state-run firms or in share sales of listed PSUs, some accounting for around 50 per cent of the funds raised by the government through these issues, have seen their value halve, analysis of data from stock exchanges shows.

Besides, LIC increasing its stake in IDBI to 51 per cent has not proven to be a prudent buy as the bank has been bleeding due to heavy losses.

LIC, with total assets of more than Rs 31 lakh crore, is the country’s largest life insurer. It has not only bailed the government out through investments in state-owned firms and public sector banks, it has also lent a helping hand to fund-starved sectors like railways, road and power over the last few years.

Data released from the RBI shows that the share of public investments in LIC’s total investment increased to 85 per cent as of March 2019 from 79 per cent as of March 2014.

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Also read: LIC put Rs 10.7 lakh cr in PSUs under Modi, almost same as investments in 6 decades to 2014

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How each investment has fared

LIC picked up more than 50 per cent of shares offered in the IPOs of state-owned general insurer New India Assurance Company in November 2017. LIC made a total investment of Rs 5,713 crore at an issue price of Rs 800 at the time.

Graphic: Arindam Mukherjee | ThePrint

However, the value of LIC’s holdings had fallen to Rs 757 crore, down 86 per cent, after the share price fell to Rs 106.85 (23 September 2019).

It’s a similar story for another general insurer, General Insurance Corporation. LIC invested Rs 5,641 crore in GIC in October 2017, but the value of its investments has nearly halved to Rs 2,979 crore at present.

LIC’s investments in three other public-sector IPOs haven’t done well either. It invested Rs 2,843 crore in Hindustan Aeronautics Ltd in March 2018, but the value of its investments has fallen 38 per cent to Rs 1,751 crore. Its relatively smaller investments in MSTC (formerly Metal Scrap Trading Corporation) and Bharat Dynamics are also trading in the red.

Another example is the acquisition of the loss-making state-run IDBI Bank. LIC invested Rs 21,624 crore in the bank to increase its stake to 51 per cent from 8 per cent in September-December 2018. The value of its equity holdings is now Rs 10,967 crore, a fall of 47 per cent in less than a year, after the bank, now classified as a private sector lender, raked up losses amounting to Rs 8,718 crore in just two quarters.

LIC also picked up more than 40 per cent of the shares offered by the government in NTPC in August 2017. It invested around Rs 4,275 crore, but the value of that investment has come down by 30 per cent in the last two years to Rs 3,003 crore.

All in all, LIC has seen the value of its holdings erode by more than Rs 20,000 crore in just five major stocks in roughly two years.

Only two of LIC’s IPO investments in the last two years in state-owned firms are in the green. The IPO investments in Mishra Dhatu Nigam and GRSE (Garden Reach Shipbuilders & Engineers), totalling Rs 246 crore, have not made losses, but the gains are only Rs 50 crore.

LIC did not respond to an email seeking comments until the time of publishing this report.

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Also read: Is Modi govt being reasonable or reckless in using LIC to back its ailing public sector?

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https://theprint.in/economy/lic-has-lost-more-than-rs-20000-crore-in-just-5-psu-stocks-modi-govt-made-it-buy-in-2-yrs/295765/

[hyperbole]

35 minutes ago, timmy said:

already starat aiyyindhi

 

LIC has lost more than Rs 20,000 crore in just 5 PSU stocks Modi govt made it buy in 2 yrs

India’s largest life insurer LIC has assets of over Rs 31 lakh crore. But value of its investments in firms like New India Assurance, HAL & IDBI Bank has halved.

REMYA NAIR Updated: 24 September, 2019 11:25 am IST

The Life Insurance Corporation of India headquarters in Mumbai | Photo: licindia.in

Text Size: A- A+

 

 

•  
•  
•  
•  
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• 11K
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New Delhi: The Life Insurance Corporation of India has often ended up being the lender of last resort to the government.

But some high-profile and large investments made by LIC in the stocks of state-run companies in recent years have eroded in value, even though stock markets overall have grown during this period, an analysis by ThePrint has found.

LIC’s investment in initial public offerings (IPOs) of state-run firms or in share sales of listed PSUs, some accounting for around 50 per cent of the funds raised by the government through these issues, have seen their value halve, analysis of data from stock exchanges shows.

Besides, LIC increasing its stake in IDBI to 51 per cent has not proven to be a prudent buy as the bank has been bleeding due to heavy losses.

LIC, with total assets of more than Rs 31 lakh crore, is the country’s largest life insurer. It has not only bailed the government out through investments in state-owned firms and public sector banks, it has also lent a helping hand to fund-starved sectors like railways, road and power over the last few years.

Data released from the RBI shows that the share of public investments in LIC’s total investment increased to 85 per cent as of March 2019 from 79 per cent as of March 2014.

---

Also read: LIC put Rs 10.7 lakh cr in PSUs under Modi, almost same as investments in 6 decades to 2014

---

How each investment has fared

LIC picked up more than 50 per cent of shares offered in the IPOs of state-owned general insurer New India Assurance Company in November 2017. LIC made a total investment of Rs 5,713 crore at an issue price of Rs 800 at the time.

Graphic: Arindam Mukherjee | ThePrint

However, the value of LIC’s holdings had fallen to Rs 757 crore, down 86 per cent, after the share price fell to Rs 106.85 (23 September 2019).

It’s a similar story for another general insurer, General Insurance Corporation. LIC invested Rs 5,641 crore in GIC in October 2017, but the value of its investments has nearly halved to Rs 2,979 crore at present.

LIC’s investments in three other public-sector IPOs haven’t done well either. It invested Rs 2,843 crore in Hindustan Aeronautics Ltd in March 2018, but the value of its investments has fallen 38 per cent to Rs 1,751 crore. Its relatively smaller investments in MSTC (formerly Metal Scrap Trading Corporation) and Bharat Dynamics are also trading in the red.

Another example is the acquisition of the loss-making state-run IDBI Bank. LIC invested Rs 21,624 crore in the bank to increase its stake to 51 per cent from 8 per cent in September-December 2018. The value of its equity holdings is now Rs 10,967 crore, a fall of 47 per cent in less than a year, after the bank, now classified as a private sector lender, raked up losses amounting to Rs 8,718 crore in just two quarters.

LIC also picked up more than 40 per cent of the shares offered by the government in NTPC in August 2017. It invested around Rs 4,275 crore, but the value of that investment has come down by 30 per cent in the last two years to Rs 3,003 crore.

All in all, LIC has seen the value of its holdings erode by more than Rs 20,000 crore in just five major stocks in roughly two years.

Only two of LIC’s IPO investments in the last two years in state-owned firms are in the green. The IPO investments in Mishra Dhatu Nigam and GRSE (Garden Reach Shipbuilders & Engineers), totalling Rs 246 crore, have not made losses, but the gains are only Rs 50 crore.

LIC did not respond to an email seeking comments until the time of publishing this report.

---

Also read: Is Modi govt being reasonable or reckless in using LIC to back its ailing public sector?

---

 

ThePrint is now on Telegram. For the best reports & opinion on politics, governance and more, subscribe to ThePrint on Telegram.

https://theprint.in/economy/lic-has-lost-more-than-rs-20000-crore-in-just-5-psu-stocks-modi-govt-made-it-buy-in-2-yrs/295765/

pichi na dash gallu PSU tappa vere dantla invest cheyara.

LIC ode ila unte inka PF exposure enta unnado?

 mottam MG la unnaru