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
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.