Taking advantage of attractive valuations, life insurers bought equities in the bulk deal segment during the last six months against selling by them during June-November 2008.
Bulk deal transactions involve transfer of more than 0.5 per cent of the number of equity shares of any listed company. The recent trend shows that insurance companies are increasing their exposure to select companies, especially banks, via bulk deals.
Through the bulk deal window, Life Insurance Corporation of India (LIC), ICICI Prudential, Birla Sun Life and Bajaj Allianz have been net buyers to the tune of Rs 267.53 crore on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
| BULKY BUSINESS Insurers' investment in bulk deals in December 2008-May 2009 | |
| Net buyers | Stocks worth (Rs cr) |
| LIC | 47.57 |
| ICICI Prudential | 217.64 |
| Bajaj Allianz | 11.75 |
| Birla Sun Life | 41.87 |
ICICI Prudential Life bought the largest chunk worth Rs 217.64 crore during December-May 2009. The largest private sector insurer bought shares of Oriental Bank of Commerce and Union Bank of India at Rs 129 and Rs 123 per shares respectively. Banking stocks have been hit hard in the last one year and, therefore, have been the most-preferred ones by risk firms.
“Banking stocks were available at stressed valuations. This is one sector that was badly hit by the downturn. There was an opportunity to increase exposure to banks, depending on the function of the stock price range,” said ICICI Prudential Life Chief Investment Officer Manish Kumar.
The country’s largest insurer, LIC, bought stocks of Indian Overseas Bank worth Rs 47.57 crore in bulk deals in the last six months. However, the state-owned insurer was absent from the market in the previous six months (June-November 2008).
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During December-May, Birla Sun Life increased its exposure to half-a-dozen companies — including Asian Hotels, Vijaya Bank, South Indian Bank and Godrej Industries — through bulk deals. Both Birla Sun Life and Bajaj Allianz bought stocks of Vijaya Bank at Rs 19.85 per share in bulk deals on the same day (March 18 this year). While the former bought 7.6 million shares, the latter purchased 5 million shares. Apart from valuations, insurance companies also opted for the bulk deal route as in such deals they did not have to face price fluctuations.
“We’re getting shares at reasonable rates and there is no middle impact on value in bulk deals. At times, we also get discounts from the seller,” said Birla Sun Life Chief Investment Officer Vikram Kotak.
In the last six months, there was huge opportunity for insurance companies as foreign institutional investors (FII) were selling and mutual funds were not in a position to buy.
Insurers said that their appetite matched with the stocks sold by others. During June-November 2008, insurers were net sellers in this segment as valuations were high. They sold shares worth Rs 28.64 crore during the period.