LIC may Get to Keep Co Stakes above 15%

Reg­u­la­tor likely to say that LIC can main­tain its stakes in 40 en­ti­ties, but hold­ings can’t be raised any fur­ther in some cos

The Economic Times - - Finance & Commodities - Shilpy.Sinha@ times­group.com

Mumbai: The In­surance Reg­u­la­tory and De­vel­op­ment Au­thor­ity of In­dia (Irda) is likely to give con­di­tional ap­proval to Life In­surance Cor­po­ra­tion of In­dia (LIC) that will al­low it to hold on to its share­hold­ing in com­pa­nies be­yond the stip­u­lated 15% limit, said two peo­ple fa­mil­iar with the plan.

Irda is likely to say that sta­te­owned LIC can main­tain its stakes in about 40 en­ti­ties to avoid a fire sale to com­ply with the reg­u­la­tory limit for in­surance com­pa­nies, but hold­ings can’t be raised any fur­ther in some of them such as ITC and Axis Bank, where it has al­ready breached the cap. Oth­ers in which LIC has more than 15% in­clude Larsen & Toubro and Cor­po­ra­tion Bank. “Irda has not ex­plicit-

ly said that we need to re­duce (our stake) in this or that com­pany,” said LIC chair­man VK Sharma.

“Irda has said that we should re­main within 15% in stocks that are non-strate­gic to us. We have replied to them but we can­not dis­close (what LIC has told the reg­u­la­tor) be­cause it is price sen­si­tive. There are two cat­e­gories. One is strate­gic in­vest­ment — we are pro­mot­ers in com­pa­nies like LIC Hous­ing Fi­nance, Cor­po­ra­tion Bank — and other in­vest­ments where we are only in­vestors. In those cases, we have to fol­low the Irda norms.” Ear­lier this year, Irda had asked In­dia’s big­gest life in­surance com­pany for a roadmap on re­duc­ing its eq­uity ex­po­sure to the limit in listed en­ti­ties. “LIC has re­quested that they would like to hold on to their stake in about 40 com­pa­nies, where it owns more than15%,” said a se­nior Irda of­fi­cial. “We are likely to al­low LIC to hold on to their stake be­cause some of th­ese are in­vest­ments made be­fore Irda came into ex­is­tence.”

A strict en­force­ment of the limit may dis­cour­age LIC from be­com­ing the in­vestor of last re­sort in gov­ern­ment dis­in­vest­ments.

LIC has as­sets worth .₹ 25 lakh crore and gets incremen­tal new busi­ness premium in­come of close to .₹ 1.3-1.5 lakh crore ev­ery year. It re­cently raised its stake in cig­a­rette maker ITC by 2% to 16.3%. The in­surer has sought Irda’s ap­proval to raise its stake in In­dia’s big­gest en­gi­neer­ing com­pany Lar- sen & Toubro by to 20.7%. “We have ear­lier al­lowed LIC to buy ad­di­tional (five per­cent­age points) in L&T and will not pre­vent them from rais­ing stake,” said the of­fi­cial cited ear­lier. The cor­po­ra­tion’s to­tal new busi­ness in­come rose 27.22% to .₹ 1.24 lakh crore in the fi­nan­cial year ended March 31.

In 2013, Irda re­vised reg­u­la­tions re­gard­ing in­vest­ments by in­surance com­pa­nies, link­ing it to the fund size. In­surance com­pa­nies can in­crease their ex­po­sure in eq­uity in a given com­pany from 10% to 12% and 15% de­pend­ing on the size of their con­trolled fund.

How­ever, if LIC wants to own more than the pre­scribed limit of 15%, it has to get ap­proval from its board and the reg­u­la­tor. It can own as much as 30% in some com­pa­nies un­der a spe­cial dis­pen­sa­tion from the gov­ern­ment.

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