Life Insurance Corpor-ation of India (LIC) turns out to be the government’s Man Friday. The insurance behemoth, which helped the Oil and Natural Gas Corporation (ONGC) auction yesterday, has made an equity investment of nearly Rs 25,000 crore in the first two months of 2012, almost equal to its investment in the first nine months of the current financial year.
With this, LIC’s equity investment in the first eleven months of 2011-12 stands at over Rs 50,000 crore. The bulk of these investments has been in public sector banks and other PSU stocks.
On Thursday, the government’s five per cent stake in ONGC, consisting of 428 million shares, came up for auction. Despite lukewarm response from the market, the government was able to raise more than Rs 12,000 crore from the issue, thanks largely to LIC’s intervention in the dying moments of the auction process. Market sources indicated LIC bid for close to 400 million of the 427.8 million shares on offer at a price of Rs 295-300 each, through multiple brokers, making up for the absence of other investors, such as state-run banks.
According to sources, during 2011-12, LIC’s equity investment would be close to Rs 60,000 crore, much above its initial target of Rs 40,000 crore for the year. Given the choppy equity market and lower sales of unit-linked products, the insurance behemoth had invested only around Rs 25,000 crore in equities during the April-December period. During 2010-11, total investments by LIC stood at Rs 1.96 lakh crore, of which Rs 43,000 crore was invested in equities.
LIC has also been busy picking up around five per cent stake in close to a dozen of public sector banks during the last one month, acting as a proxy for the government, which planned to recapitalise state-run lenders. Accordingly, the largest life insurer in the country, has picked up stakes in Dena Bank, Bank of Maharashtra, UCO Bank, Allahabad Bank, Indian Overseas Bank and IDBI Bank, among others. Canara Bank and Syndicate Bank are among other lenders that are in the process of allotting shares to LIC.
“Close to Rs 4,000-5,000 crore has been invested in government-owned banks. And taking ONGC into account, over the last two months, LIC’s total equity investment was close to Rs 25,000 crore. With the other PSU issues expected to come up for disinvestment, total investment for the year is likely to be around Rs 60,000 crore,” sources said.
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Earlier, in 2010-11, the government had raised Rs 22,763 crore by divesting stakes in six companies - SJVN, Engineers India, Coal India, Power Grid, MOIL and Shipping Corporation of India. LIC had invested close to Rs 8,000 crore for buying shares in these companies.
This year, to meet the disinvestment target of Rs 40,000 crore, besides ONGC, government has already approved disinvestment in Steel Authority of India Ltd, Hindustan Copper Ltd, Bharat Heavy Electricals Ltd and National Buildings Construction Corporation. In line for approval are Rashtriya Ispat Nigam Ltd and Hindustan Aeronautics Ltd. The department of disinvestment is also re-examining all the central public sector enterprises eligible for disinvestment to reach as close as possible to the Rs 40,000-crore disinvestment target.