Life Insurance Corporation (LIC) of India intends to pump in around Rs 1,05,000 crore into non-convertible debentures (NCDs) and equity in the current financial year, nearly 20 per cent more than the Rs 88,000 crore it invested in these instruments in 2008-09.
Around Rs 55,000 crore will be invested in NCDs and the remaining Rs 50,000 crore in the stock market, senior LIC executives told Business Standard.
With overseas markets largely frozen, Indian companies are looking to raise more resources from domestic sources, and the state-owned insurer, which has sizeable investments in large Indian companies, is looking to tap the opportunity.
Last year, the country’s largest life insurer invested Rs 40,300 in equities and around Rs 48,000 crore in NCDs and other debt instruments.
| LIC’S SHAREHOLDINGS IN COMPANIES as of March 31, ‘09 | |
| Companies | Stake (%) |
| Gloster Jute | 23.75 |
| Modella Woollen | 19.47 |
| MTNL | 17.85 |
| Larsen & Toubro | 17.44 |
| Mahindra & Mahindra | 17.30 |
| ACC | 16.83 |
| Empire Industries | 16.48 |
| HPCL | 16.01 |
| Source: BSE | |
The higher investment plan is predicated on the expectation of a 4.5 per cent increase in new premiums this fiscal from Rs 47,828 crore last year to Rs 50,000 crore.
LIC’s total premium income, which includes renewal premium and first premium income, is expected to be over Rs 1,75,000 crore, around 12 per cent higher than last year’s level of around Rs 1,55,700 crore.
Asked about LIC’s investment plans, Managing Director Thomas Mathew T said the life insurer would always be a major player in debt instruments that finance the country’s infrastructure growth.
“To sustain economic growth, infrastructure growth plays a key role. So, the demand for money from infrastructure firms will go up, and they will look at more NCD issues,” he said.
The company intends to subscribe to NCDs that fetch over 12 per cent a year.
He added that with the formation of a stable government, LIC expected “the (equity) market rally to continue in the coming days”.
In April, LIC invested about Rs 5,000 crore in nine NCD issues. “Our NCD investment accounts for about 20 per cent of the total subscription in NCD issues so far this year,” said a senior LIC executive.
LIC’s investment in equity has been nominal in the current financial year, though the insurer declined to provide data. A lack of investor interest in unit-linked insurance plans (Ulip), in which 90 to 95 per cent of the funds is deployed in equity, has also been responsible for low equity exposure. But, with the market environment improving, insurance companies expect Ulip demand to rise again.
“We believe the bull-run will continue. Given the positive sentiments following the election of a stable government, our investment in equity and equity-related instruments will also go up,” Mathew added.
