Under SEBI’s Lens, LIC Housing Finance Clarifies That Its Preferential Allotment Price Follows AOA Provisions
Moneylife Digital Team 17 July 2021
On Saturday, LIC Housing Finance (LICHFL) issued a clarification regarding its preferential issue proposal claiming there is no violation of the provisions of the Articles of Association (AOA).
 
Despite this, LIC Housing Finance Limited has been denied permission to release the results of the voting on agenda at the upcoming Extra Ordinary General Meeting (EGM) while the exchanges seek more clarity on its preferential allotment to LIC.
 
Moneylife had reported earlier this week that at the Securities Appellate Tribunal (SAT) hearing, PNB Housing Finance, which is currently under the Securities and Exchange Board of India (SEBI)’s radar for a controversial stake sale had cited that similar preferential deals were on offer by LIC Housing Finance and Barbeque Nation to prop up its case. 
 
Following this revelation at the SAT hearing, SEBI had directed the exchanges to examine the preferential issue proposals of LIC Housing Finance and Barbeque Nation.  
 
LIC Housing Finance confirmed that on 12th July, it had received an email from BSE and National Stock Exchange (NSE).
 
In separate emails, the exchanges sought clarifications on compliance with the provisions of articles of association (AOA) of the company regarding the process arrived for the valuation at which the said shares are offered to its parent Life Insurance Corp of India (LIC).
 
The matter pertains to the preferential issue of 4.54 crore shares to LIC at the extraordinary general meeting (EGM) of the members of LIC Housing Finance on Monday, 19th July.
 
“There is no violation of the provisions of AOA as the price has been duly determined in accordance with the relevant provisions of the AOA as well as the Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018,” the mortgage lender responded to the exchanges.
 
Following this, LIC Housing Finance received a second mail on 16th July from both exchanges seeking clarification on why the valuation report of a registered valuer was not considered while determining the price of shares proposed to be issued on a preferential basis.
 
LIC HFL response to the second email says “...as the Company being a listed company is not required to obtain a registered valuer’s certificate as provided under rule 13 of the companies (share capital and debentures) Rules, 2014”.
 
The housing finance company has reiterated that the price for the preferential allotment has been arrived at in compliance with the provisions of AOA, the companies act, and SEBI guidelines.
 
LIC Housing Finance however has admitted that the exchanges have directed that “in the interest of investors in the securities market, the voting in the EGM may be carried on. However, the results of the voting on Agenda item no. 1 may not be made public and the same shall be kept in a sealed cover pending the completion of examination.”
 
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