Life Insurance Corporation of India has sought the permission of the Insurance Regulatory and Development Authority for raising its stake in public sector banks beyond 10 per cent.
Ever since the IRDA put a 10 per cent cap on investments by insurance companies in a single entity last year, LIC has been in talks with the regulator for easing this stipulation in certain cases. The IRDA had already allowed the corporation to hold on to its existing stake in companies even if they are above 10 per cent.
However, LIC wants this concession to be extended to fresh investments also.
“We have requested IRDA that we be allowed to increase our stakes to more than 10 per cent in banks. We have investments in most of the banks. And in some banks, our stakes are much more than 10 per cent as the investments were made before IRDA put a cap,” said Mr Thomas Mathew, Managing Director, LIC.
“If the investment limit is restricted to 10 per cent, we lose the opportunity to invest in good banks and good stocks. Most of LIC’s investments are in top public sector banks,” Mr Mathew said in an interview to Business Line.
LIC has 27 per cent stake in Corporation Bank. Other banks in which it holds substantial stake include SBI (9.56 per cent), Allahabad Bank (11.64 per cent), OBC (9.76 per cent) and Bank of Baroda (8.72 per cent).
Higher limit in infrastructure cos
Considering the large investment requirements of the infrastructure sector, the IRDA has permitted LIC to hold up to 25 per cent stake in infrastructure companies.
“IRDA has made a concession and allowed LIC to increase its stake in infrastructure companies up to 25 per cent,” Mr Mathew said.
In January, the IRDA raised the cap on investments by insurance companies in an infrastructure company from 10 per cent to 20 per cent. “In many of the infrastructure companies such as Rural Electrification Corporation, Power Finance Corporation, NTPC and NHPC, we already hold more than a 20 per cent stake,” Mr Mathew said.
“In major infrastructure projects, we would like to increase our stake. With the new government’s infrastructure thrust, there are plenty of opportunities (for investment),” he said.
Investment in Equity
Mr Mathew said LIC booked profits in the equity market to the tune of Rs 2,500 crore in the last two-and-a-half months.
During the period, LIC invested around Rs 7,000 crore. “LIC’s investments are only in Nifty and top Sensex stocks. In this duration, LIC booked profits of Rs 2,500 crore. Last year, we were not able to book profits as markets were very much down. We were only purchasing. In 2007-08, we booked profits to the tune of Rs 10,000 crore,” he said.
For the financial year 2009-10, LIC plans to invest Rs 1,75,000 crore (Rs 1,62,000 crore last year). Of this, around Rs 50,000 crore will be in the equity market.
“Last year, we invested Rs 40,000 crore in equities. When the markets hit the bottom last year, we invested Rs 40,000 crore, which has given us good returns as the markets have gone up. So our aim is to buy when the market is down. We hold it for a long term and sell it when we get the maximum price to ensure adequate returns to policy holders,” he said.
Source: The Hindu Businessline