In a year when equity markets fell by 38 per cent, the country’s largest insurance company, state-run Life Insurance Corporation of India (LIC), has booked a profit of Rs 2,600 crore through sales of Indian stocks.
According to industry estimates, LIC has sold shares in 75-80 Bombay Stock Exchange (BSE)-listed companies during the past financial year, when most domestic institutions were either booking losses or buying more shares. The 30-stock bellwether BSE index fell from 15,771.72 in April last year to 9,708.50 at the end of March 2009, marking one of the worst-ever falls of Indian stocks during any financial year.
During this period, while most insurance companies and mutual funds were incurring losses, LIC managed to book profit by selling in equities. It had also booked a profit of around Rs 10,000 crore during FY07-08.
| DUMPING STOCK Biggest offloading deals by LIC during FY09* (in %) | ||
| Company | Holding (as on March 31, 2008) | Holding (as on March 31, 2009) |
| Hero Honda Motors | 5.42 | 0.00 |
| Kirloskar Electric | 7.66 | 5.10 |
| Hindustan Unilever | 7.31 | 5.86 |
| Bajaj Electricals | 3.35 | 2.03 |
| Colgate-Palmolive | 6.08 | 4.97 |
| Source: BSE | ||
“THOUGH the profit booking numbers have come down from that of fiscal 2007-08, LIC still considers that a profit-booking amidst falling markets were possible during FY08-09 because our investments were made for a long term. Now, as the markets tend to improve, given the formation of a stable government, we expect the profit booking numbers to go up again,” said a senior LIC executive.
Apart from the Ranbaxy open offer, where LIC had offloaded a massive 8.56 per cent stake, a sale of about 1.11 per cent in Colgate-Palmolive, about 1 per cent stake sale in Cadila Healthcare, a 1.32 per cent offloading in Bajaj Electricals, a 1.45 per cent sale in Hindustan Unilever, a 5.42 per cent sale in Hero Honda and a 2.56 per cent sell-off in Kirloskar Electric were some of the biggest profit booking deals done by the insurer during the past financial year.
Despite the Sensex rising by about 40 per cent from 9,745.77 since April 1, the insurer could not book much profit, as most of the bull runs have come over the past few days. Monday’s historic jump kept most investors away from profit booking, as the circuit filters were broken in just 60 seconds.
“We have been booking profit even this financial year, but not so aggressively. Also, there were fewer profit booking occasions during April, as the markets were suffering from negatives due to political uncertainties. Now that we have a stable government, the markets look steady. Most of our investments in equities are meant for the long term, so profit booking gains come from those sales where investments were made long back,” said Thomas Mathew, Managing Director.