LIC Strikes it Rich with Investments in State-owned Cos
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.