Irda yet to decide on easing single company investment limit.
In spite of the cap on single company exposure, Life Insurance Corporation of India (LIC), the country’s largest institutional investor, has increased its stake in at least 11 companies beyond the permissible 10 per cent limit for equities.
In August, the Insurance Regulatory and Development Authority (Irda) had capped a life insurer’s exposure to a single company at 10 per cent and LIC had subsequently sought a review.
Though the regulator is yet to relax the norms, the public-sector insurer has not diluted its holdings in many blue-chip stocks and has instead used the lower valuations to raise its stake during the third quarter. The shareholding pattern for a large number of companies is yet to be submitted for the December quarter.
In other companies such as Maruti Suzuki, while LIC has maintained its stake at 11.05 per cent, it increased its holdings through two of its unit-linked schemes. Through two Ulips – Money Plus and Market Plus – it held a 3.59 per cent stake in Maruti Suzuki at the end of December, compared with 3.31 per cent at the end of September 2008, taking its total holding to 14.54 per cent.
“This is a part of our daily exercise and this is not done intentionally. The increase is marginal and we will always comply with Irda’s investment norms,” said a senior LIC executive.
When asked about Irda’s position on the investment ceiling, an official at the regulatory agency said: “We are examining the situation and will take action very shortly. The investment norms will not be relaxed any further and insurers who are found to be violating the norms will face regulatory action.” In case of infrastructure companies, Irda has relaxed the norms recently.
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| STRENGTHENING ITS GRIP LIC's shareholding (%) | ||
| Company | Sept '08 | Dec '08 |
| M & M | 17.28 | 17.61 |
| ACC | 17.18 | 17.48 |
| L&T | 17.01 | 17.38 |
| Empire Ind | 16.96 | 16.48 |
| HPCL | 15.76 | 16.03 |
| Siemens | 11.77 | 13.26 |
| Reliance Infra* | 11.93 | 12.99 |
| Dr Reddy's Labs | 12.70 | 12.83 |
| Ashok Leyland | 12.09 | 12.74 |
| Tata Tea | 11.10 | 11.93 |
| Tata Power* | 10.43 | 11.44 |
| Zee Entertainment | 9.56 | 10.55 |
| (Source: BSE), * Infrastructure company | ||
Sources at LIC said that the company’s investment decisions were based on the inputs from the research team and based on the valuation and future prospects.
“We have also reduced our stake in some companies. LIC will never flout Irda regulations,” the senior executive added.
The pointed to companies where LIC had reduced its stake during the third quarter. For instance, it sold 1.5 million shares of Tata Chemicals to pare its holdings to 9.21 per cent at the end of December, as against 9.75 per cent in September. Similarly, it exited Bhel, where it held 2.2 per cent at the end of September.
“This is a good time to build a good portfolio and hold stocks for two-three years. LIC is a long-term player. Valuations are attractive and LIC is finding opportunities to buy at lower prices,” said Hitesh Agarwal, Head Research at Angel Broking.