LIC Strikes it Rich with In­vest­ments in State-owned Cos

The Economic Times - - Markets & Finance - OUR BUREAU Chg (%)

In­vest­ments in the share sales of state-owned com­pa­nies in the last two years have come as a bless­ing in dis­guise for Life In­sur­ance Cor­po­ra­tion (LIC). The pub­lic-sec­tor in­surer, which has drawn flak for bail­ing out the govern­ment’s dis­in­vest­ment drive, has made an aver­age of 38% re­turns, worth al­most .` 6,000 crore, on in­vest­ments made in 11 state-owned com­pa­nies in 2012 and 2013. An ET study of the cur­rent value of shares, which LIC bought in the govern­ment’s of­fer for sale (OFS), shows the in­sur­ance gi­ant lost money in only one of the 11 is­sues. The value of the in­surer’s shares of Hindustan Cop­per, which were bought in the OFS in Novem­ber 2012, is down 33%. In­vest­ments in ITDC fetched LIC the high­est per­cent­age re­turns, while ONGC re­turned the most in ab­so­lute terms. The in­sur­ance com­pany had sub­scribed to 98% of the gov- ern­ment’s stake sale in ONGC in Jan­uary 2012 that led to many on Dalal Street and busi­ness me­dia crit­i­cis­ing the fi­nance min­istry. “LIC might have been un­will­ing buy­ers in many of these share sales, but since they are long-term in­vestors, the pur­chases have worked well for them,” said UR Bhat, man­ag­ing di­rec­tor, Dal­ton Cap­i­tal In­dia. “If LIC had to fo­cus on daily NAVs (net as­set val­ues), things would have been dif­fer­ent,” he said. LIC had pur­chased shares of pub­lic sec­tor com­pa­nies when they were out of favour in 2012 and 2013. Such pur­chases, how­ever, were in line with LIC’s in­vest­ment strat­egy, which is con­trar­ian, said bro­kers. “LIC’s strat­egy has been right. It buys when oth­ers are sell­ing and sells when there is frenzy in the mar­kets. More­over, it has the lib­erty to take a call on a stock for over 5- 20 years,” said Ajay Bodke, head — in­vest­ment strat­egy and ad­vi­sory at Prab­hu­das Lilladher.

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