LIC Housing was a big mover in morning trades following reports that the company has raised $50 million from international markets for a term of five years.

By 10:37 IST, the scrip of the second-largest housing finance company climbed 3.95% to Rs 92. It registered volumes of 6,475 shares on BSE. The stock has now risen 40% from Rs 65.60 on 31 March 2003.

As per reports, funds were raised at 69 basis points (bps) over the London interbank offered rate (Libor). This is the second tranche of $50 million raised by LIC Housing in a span of six months. In December 2002, the housing finance company had raised $50 million for a term of five years as well. LIC Housing is aiming at raising close to Rs 2,000-2,500 crore in the present financial year.

The new capital raising exercise will reduce the company's cost of debt and, therefore, will prove advantageous.

During the year 2002-03, LIC Housing has been able to restructure its entire borrowings from LIC, amounting to Rs 3,400 crore. Besides, the housing finance company has saved interest cost by swapping its existing high cost borrowings from banks. As a result, LIC Housing's average cost of funds has come down from 11% to 9%.

Analysts say this cost of funds is still higher than the average 6-7% in the banking industry. But the fact that the company is taking initiative to reduce its cost of borrowing is enough to stimulate the stock.

Earlier, there were reports that LIC Housing Finance recorded a spectacular growth in business during the financial year ended 31 March 2003. The company sanctioned 84,126 loans for a total amount of Rs 3265.78 crore and disbursed 76,663 loans for a total amount of Rs 2941.24 crore under the individual loans category in the course of the year.

The total sanctions inclusive of individual and project loans amounted to Rs 3593.44 crore. Disbursements totaled Rs 3190.83 crore, showing a robust growth of 62.6%.

The solid growth recorded by the company in disbursements may be attributed to the buoyant housing finance market spurred on by the low interest regime, tax benefits and low property prices. S.C. Jain, Chief Executive, LIC Housing Finance, recently said, "As an essential part of our long term strategy we have been focusing on delivering superior value to the customers in terms of competitive price, customised products and transparent business practices for the benefit of customers and excellent service. Our record performance this year is the result of all these initiatives."

Elaborating on the future plans, Jain indicated that the company plans to be more aggressive in the northern region. Currently, a significant portion of its business is from the southern region.

During the fiscal ended 31 March 2003, the housing finance sector witnessed fierce and aggressive competition, with a number of Indian and international banks joining the fray. The company is the second biggest player in the housing loan segment with a market share of around 18%.

LHFC was promoted by Life Insurance Corporation in 1989 and came out with a public issue in 1994.

For the third quarter ended 31 December 2002, the company recorded a 29% rise in net profit to Rs 41.34 crore (Rs 32.12 crore) on an 8% increase in net sales to Rs 231.20 crore (Rs 214.44 crore).

As on 31 March 2003, promoters held 38.50% strakes in the company, while the public andf institutions held 22.62% and 29.74% respectively.