LIC to offload excess stake in firms in 2 years

Insurer needs to dilute stakes worth Rs 9,000 cr in 12 companies to comply with 15% shareholding cap

The Insurance Regulatory and Development Authority of India has given Life Insurance Corporation of India (LIC) two years to pare shareholdings in companies in which it owns more than the permitted 15 per cent.

“We have deliberated on the road map with the ministry of finance and the LIC board along with certain stakeholders, and set the time limit to comply with the norm,” an official said.

Sources said LIC had acceded in principle to the order and had submitted a divestment road map.

LIC holds more than 15 per cent stakes in 12 companies. The insurer will have to sell shares worth Rs 9,000 crore at current market prices to shed its excess holdings in these companies.

ITC, Larsen & Toubro, and Corporation Bank are the only companies in the top 500 in which LIC holds over 15 per cent stakes. The state-owned insurer had obtained special permission to hold stakes over the permissible limit in some cases and sources said the latest directive would apply to these companies as well.

An email to LIC seeking comments on the development went unanswered.

“LIC has had exemptions on the investment ceiling in companies thanks to its legacy. Besides, LIC has been the go-to investor for the government for dilution or equity infusion,” a banker said.

Note: *At current market rate; Source: Capitaline; Compiled by BS Research Bureau

“The timeline is realistic and LIC will be able to trim its holdings. The markets are holding up and LIC can divest through various means, including block deals and public offerings,” said SB Mathur, former chairman of LIC.

Earlier in the year, LIC bought ITC shares worth Rs 6,700 crore previously held by the Specified Undertaking of the Unit Trust of India (Suuti). Through this deal, LIC’s holding in ITC crossed 15 per cent.

LIC’s purchase of the stake in the cigarette manufacturer had raised eyebrows. A public interest litigation (PIL) was filed by R Venkataramanan, a trustee of the Tata Trusts, along with other prominent citizens challenging the government’s investments in tobacco companies.

In April, the Bombay High Court directed the finance ministry and others to be made parties to a plea against LIC's investments in ITC. According to the petition, the central government owns a 32 per cent stake in ITC through five state-run insurance companies and the Unit Trust of India.