LIC Plans to Buy 5% More in L&T

The Economic Times - - Companies: Pursuit Of Profit -

Mum­bai : Life In­surance Cor­po­ra­tion of In­dia (LIC) plans to buy 5% more in In­dia’s big­gest en­gi­neer­ing com­pany Larsen & Toubro (L&T) for ₹ 6,500 crore at cur­rent mar­ket prices, said two peo­ple fa­mil­iar with the pro­posal. The in­surer, which al­ready owns 16% of the com­pany, has got the reg­u­la­tor’s ap­proval to buy the ad­di­tional stake re­cently.

The state-run in­surer has not set a time frame in which it would buy the ad­di­tional stake, but ex­pects to per­suade the gov­ern­ment to sell a part of its Spec­i­fied Un­der­tak­ing of the Unit Trust of In­dia, or SUUTI, stake like it did with ITC. LIC couldn’t be reached for a com­ment im­me­di­ately. “We have taken ap­proval from the reg­u­la­tor to buy an ad­di­tional 5% stake in L&T from SUUTI,” said an of­fi­cial from LIC. “We have not de­cided on the time­line.”

LIC owns sub­stan­tial stakes in blue chip com­pa­nies such as L&T, SBI and ITC. The In­surance Reg­u­la­tory and De­vel­op­ment Au­thor­ity of In­dia (IRDAI) has capped the in­surer’s own­er­ship in a sin­gle com­pany at 15% to avoid build-up of risk. For any in­crease, LIC has to take an ap­proval from its board and then from the reg­u­la­tor. It can own as much as 30% in some com­pa­nies un­der a spe­cial dis­pen­sa­tion

CLAUDE MONET, from the gov­ern­ment.

The state-run in­surer, with shrink­ing op­tions of good in­vest­ment which could pro­vide sta­ble growth and re­turns, is keen on buy­ing the SUUT stake. On Fe­bru­ary 8, LIC bought 2% stake in ITC for ₹ 6,700 crore from SUUTI. Now, SUUTI owns 9.1% stake in ITC, 6.69% in L&T and 12.02% in Axis Bank.

LIC had re­cently made a pro­posal to the IRDAI to buy some ad­di­tional stake in L&T, as it owns more than 16%. Post the trans­ac­tion, when­ever it hap­pens, LIC’s stake will go up to 21% in the com­pany.

Ear­lier, the reg­u­la­tor had asked LIC to get ap­proval from its board to raise stake in both ITC and L&T be­sides ap­proval from its in­vest­ment com­mit­tee. This was done to en­sure that the board takes re­spon­si­bil­ity for the risk of tak­ing higher ex­po­sure to any com­pany.

The gov­ern­ment has been sell­ing the hold­ings of SUUTI in var­i­ous com­pa­nies. It has stakes in 43 listed and un­listed com­pa­nies.

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