Ignores Irda directive capping holdings at 10%.
The Insurance Regulatory and Development Authority directive capping a life insurer's holding in a company at 10 per cent has had little impact on Life Insurance Corporation's (LIC) investment decisions.
While the public sector insurer has been permitted to hold on its stake in companies where the limit was breached, LIC is deciding on its investment based on the outlook on individual stocks.
As a result, according to the data culled out by Business Standard, during the fourth quarter of 2008-09, the largest life insurer has marginally reduced its stake in at least 10 companies where the exposure was over 10 per cent. At the same time, it retained its stake in close to 10 companies (see table). And, in case of one company — Hindalco — it raised its stake from 8 per cent at the end of December 2008 to 10.42 per cent at the end of March 2009 and breached the 10 per cent ceiling.
| LIC STAKES | ||
| Company | Dec. 2008* | Mar. 2009* |
| ACC | 17.48 | 16.83 |
| Ambuja Cements | 11.25 | 11.23 |
| HPCL | 16.03 | 16.01 |
| Mahindra & Mahindra | 17.61 | 17.3 |
| Tata Tea | 11.93 | 11.89 |
| Cipla | 13.49 | 13.47 |
| Grasim India | 12.75 | 12.57 |
| ITC | 13.98 | 13.61 |
| Tata Chemical | 11.71 | 11.69 |
| Torrent Power | 10.07 | 9.88 |
| UT | 10.96 | 8.90 |
| Axis Bank | 10.36 | 10.36 |
| Bharat Bijlee | 10.79 | 10.79 |
| Empire Ind | 16.48 | 16.48 |
| Merck | 10.12 | 10.12 |
| Nagpur Power | 14.69 | 14.69 |
| Zee Entertainment | 10.55 | 10.55 |
| IFCI | 11.35 | 11.35 |
| Jhagadia Copper | 11.77 | 11.77 |
| MTNL | 17.84 | 17.85 |
| Simplex Mills | 12.91 | 12.91 |
| Tata Motors | 10.27 | 10.27 |
| * at the end of quarter ended | ||
“Buying or selling is our internal call. We are compliant with the regulatory regime,” said a senior executive in LIC's investment team.
He added that the state-run insurer follow Irda’s investment guidelines. Irda allows insurers to buy stake up to 10 per cent in listed companies.
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LIC has raised its exposure to banks. It has raised stake in ICICI bank, Bank of Baroda, Bank of India to 9.38 per cent from 8.80 per cent, 8.72 per cent from 7.07 per cent and 6.40 per cent from 5.79 per cent respectively.
Earlier, a senior Irda official had said that policyholders will be at a loss if LIC sells its stake in a downturn citing that 95 per cent of the money in equity belongs to policyholders.
While LIC was given the relief not to pare its holdings immediately in the companies where it holds over 10 per cent stake, it was also asked not to increase their stake in companies where it held above the prescribed limit.
At the end of March 2009, there were about 35 companies in which the life insurer held over 10 per cent stake. LIC held over 26 per cent stake in Corporation Bank, for which it had received a regulatory forbearance a few years ago. In case of two companies – TCM and Gloster Jute—it held over 23 per cent.
In some companies were it held over 9 per cent stake at the end of December 2008 it has brought down its stake. For instance It help 9.88 per cent in BPCL and brought it down to 4.43 per cent. Similarly, in Tata Communications it has reduced its stake from 9.21 per cent to 8.85 per cent,
It has increased the share holding in companies where it is well below the 10 per cent limit like Bombay Dyeing, Birla Corp and Bharti Airtel.
In order to help the cash strapped infrastructure sector, Irda has last year increased investment limit in individual infrastructure company to 20 per cent from 10 per cent. This has helped insurer to enjoy higher stake in infrastructure companies like Reliance Infrastructure, Tata Power, Torrent Power, Thana Electric Supply and Nagpur Power.