LIC gave Rs 8,077-cr lifeline to Indian Oil

Life Insurance Corporation (LIC) of India acquired a “substantial” quantum of shares in the Indian Oil Corporation (IOC) offering on Monday, valuing the investment in the state-owned refiner at Rs 8,077 crore, showed stock exchange disclosures.

The insurance behemoth purchased 20.87 crore shares, representing an 8.59% stake, in the secondary market offering that saw lukewarm response from foreign institutions and retail investors amid a rout in global equities. LIC’s stake in IOC will now rise to 11.11% from 2.52% earlier.

After the stake sale, the government’s stake sale drops to 58.57%. The government sold 10% of the equity capital of the oil refiner at a floor price of Rs 387 per share, mopping up more than Rs 11,000 crore, with the issue subscribed 1.18 times. The government’s collections from selling minority stakes in public sector companies now stand at nearly Rs 13,000 crore.

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Interestingly, the IOC share jumped 4.36% in volatile trade on Tuesday, reflecting a mark-to-market gain of Rs 161.75 crore on LIC’ investment. On Monday, the IOC scrip declined 4.11%, while stocks of other refiners and energy companies fell even more with some hitting 52-week lows as global financial markets took a beating over concerns of economic growth in China.

In the past, LIC has featured as the single biggest investor in many PSU auctions. In January 2015, LIC acquired 45% in Coal India’s Rs 22,557-crore offering. In December 2014, LIC took up more than 72% of the shares offered in the Steel Authority of India (SAIL) auction. SAIL’s 5.82% stake sale (first tranche) in March 2013 also saw LIC acquire nearly 70.6% of the shares on offer, and more than two-thirds of the shares offered in the second tranche of Hindustan Copper’s disinvestment in July 2013.

After Monday’s stake sale in IOC, the government will look to sell minority stakes in ONGC, NTPC, NMDC, BHEL, Bharat Electronics and Oil India, among others. In addition, the department of disinvestment (DoD) has also proposed to conduct a follow-on offer in CPSE ETFs to meet its record disinvestment target of Rs 69,500 crore. In the previous fiscal, the government had set a target of Rs 63,425 crore, which was revised down to Rs 36,925 crore, but managed to raise only Rs 24,277 crore, DoD data showed.