Recently, Public Sector Banks in India (UCO Bank, Central Bank of India, Indian Overseas Bank, and Punjab & Sind Bank) raised funds via QIP (Qualified Institutional Placement). The Indian government is planning to reduce its ownership in five public-sector banks (PSBs) over the next four years. This plan is being developed in coordination with the Department of Investment and Public Asset Management (DIPAM), the Department of Financial Services (DFS), and the banks themselves. The goal is to bring the government’s stake in these banks down by up to 20% to comply with the Securities and Exchange Board of India (SEBI) regulations.
QIP (Qualified Institutional Placement) is a way for companies to raise money quickly by selling shares to big investors like mutual funds, banks, insurance companies, and pension funds.
UCO Bank, Central Bank of India, Indian Overseas Bank, and Punjab & Sind Bank have collectively raised ₹6,155 crore through QIPs during the week ending March 28. But from where did these banks get so much money? If you are also thinking so then you need to read this full report.
As per the details, the largest insurance company in India – LIC has invested its money in these public sector banks. LIC has alone invested over ₹1,400 crore in these Banks. Life Insurance Corporation of India (LIC) has emerged as the largest investor in the recent qualified institutional placement (QIP) of shares by four public sector banks.
Apart from LIC, other companies have also invested in their money in QIP shares of these banks. Some of the significant investors in the QIP issuances included:
- SBI Life Insurance
- ICICI Prudential Life Insurance
- Non-bank lender IIFL Finance
- Pension fund schemes
- Other Government banks
Let’s have a Look at LIC Investment
UCO Bank
UCO Bank successfully raised ₹2,000 crore through QIP. LIC has emerged as the largest subscriber in this fundraising. LIC has acquired over 24% of the total QIP issue, which will increase its presence in the public banking sector. The shares were allotted at a price of ₹34.27 per share, which was at a 5% discount to the floor price.
Central Bank of India
Central Bank of India raised ₹1,500 crore through QIP. LIC has secured nearly 16% of the total allotment. Other major companies that have invested in Central Bank of India are:
- Punjab National Bank (PNB)
- Canara Bank
- Bank of Baroda (BoB)
Each of these banks acquired 5.3% of the total shares on offer. The QIP issue was priced at ₹40.49 per share.
Punjab & Sind Bank
Punjab & Sind Bank raised ₹1,219 crore via QIP at a price of ₹38.37 per share. The major companies that invested in this fundraising are:
- LIC
- SBI Life Insurance
- Central Bank of India
- Indian Overseas Bank
Indian Overseas Bank
Indian Overseas Bank raised ₹1,436 crore through QIP. LIC, IIFL Finance, SBI Pension Fund, and LIC Pension Fund acquired over 62% of the total shares.
IDBI Bank
You must be aware about the privatisation of IDBI Bank. The Government of India has announced the privatisation of IDBI Bank and sold its majority stake to LIC. LIC has 49.24% stake in IDBI Bank as per the shareholding pattern as on 31.12.2024.
This shows clearly that government is indirectly selling its stake in PSU Banks to LIC and LIC will subsequently sell the stake to other private companies or individuals.
