After having booked a profit of nearly Rs 10,000 crore from the equity market, the biggest domestic institutional investor, Life Insurance Corporation of India (LIC), expects to invest Rs 2 lakh crore in equities and debt this year. In an interview with Shilpy Sinha, LIC’s managing director Thomas Mathew T says that the corporation expects to make similar profits this year. Edited excerpts:
You have registered a growth of around 150 per cent in new income in the first quarter. Will it be possible to sustain the growth with new Ulip guidelines?
The new norms are going to be effective from September. We will see how things shape up. We will make all efforts to sustain this growth. We have grown because of our attractive products, very aggressive and effective marketing strategy and a lot of our corporate initiatives like training.
Since you expect a substantial jump in premium collection this year, will your investment strategy be any different?
Our investment strategy depends on fund availability and it is guided by the Irda regulations and our investment committee guidelines. If more funds come under Ulip we will be able to invest in equities. For last few years we have been consciously making an effort to focus more on traditional business. We are bringing down our Ulip component slowly. Last year, it came down to 65 per cent and still we are looking down.
Under traditional portion a substantial portion goes in infrastructure, debt and only 10-15 per cent goes in equity while funds under Ulips are invested as per the customer’s choice.
How much do you expect to invest this year?
We are expecting a total investment of Rs 2 lakh crore. Of this Rs 1 lakh crore will go in government securities, Rs 60,000 crore will go in equities and the rest in corporate bonds, infrastructure and others.
Last year you were bullish on PSU public offers. Will you continue with this strategy this year?
PSUs are quite good from a long-term investment point of view. We will look at all companies provided that there is a long-term value with good fundamentals. We are a long-term player. We look for long-term value because our liabilities are long term. What happens in the market immediately may not bother us much. We always take a contrarian approach in the market — when the market is down we buy and vice-versa.
Do you see a lot of opportunities coming up with the mandatory 25 per cent public shareholding?
We will have to work on that. We are looking forward to it. We will look at everything in the market, provided it is good for policyholders in the long run.
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How much profit did you book last year?
Last year, we made a profit close to Rs 9,432 crore. This was significantly higher than the year before when the profit was Rs 2,500 crore. We could book profit towards the end of the year when there was a spurt in the market. Our investment income was Rs 71,000 crore. This was substantially higher over the previous year when it was Rs 59,000 crore. At the same time net investment was over Rs 40,000 crore. NPAs have come down below 1 per cent. We expect to book similar profit this year.
You have a substantial stake in almost all banks.
Banks stocks are good and because of the turmoil in the European countries, Indian banks are getting prominence. We have stake in almost all banks and we will continue buying and selling stakes in these banks.
Given your huge corpus do you want any flexibility in investment guidelines in order to boost your returns? Do you want the cap to increase above 10 per cent?
Last year we have got some relaxation in infrastructure. We have no issues with the regulations. We invest in companies from our different funds like life and Ulip. Our single fund has not crossed 10 per cent. We would not increase our stake from one fund without the approval of the government or the regulator.
IPOs are not getting good response. Will it be a safe bet to invest in public offers this year?
We see it from the long-term perspective. For example some IPOs in the power sector may be trading below their opening price presently but the sector as such has to come up as the country’s focus is on infrastructure.
A lot of private equity and venture capital players are raising funds from the domestic market. What is your approach to investment?
Our criterion is that it should be infrastructure-related venture funds. We look at only such venture funds, subject to other guidelines like we invest 10 per cent of the corpus or 50 per cent of the promoters’ share. In 2009-10 we invested Rs 100 crore in venture capital funds. We will look to invest around this number.