General Insurance Corporation of India (GIC) is restructuring its investment portfolio, to do away with non-dividend paying scrips. Of the 680-odd companies in its investment portfolio, valued at Rs 1,400 crore as in December 2001, GIC is looking at exiting from around 275 scrips. These are non-dividend paying companies, which are not much traded on the bourses. In the last few months, the GIC management has already exited 30 scrips.
The idea is to encash on existing value, however small, and utilise the funds for further equity investment. At the same time, the institution is looking at capitalising on long-term gains as it sets out to book profits in its old investments and go in for new economy stocks. "We are looking at what kind of profits we can make based on current opportunities," said officials.
GIC has also been actively participating in the open offers. "GIC has actively participated in open offers to exit from companies, whose stocks are not so liquid and where it has found it difficult to sell its large holdings without depressing the price in the secondary market," said industry sources. Some of the open offers where GIC participated in the past include Abbott Laboratories, Best & Crompton, Carrier Aircon, Indal, Modi Xerox, Philips India, Raasi Cement, Sandvik Asia, Tata SSL, Wheels India and Wimco.
As GIC churns its portfolio and becomes active in the stock market on the lines of the Life Insurance Corporation of India (LIC), it will however have to adhere to the norms applicable to the corporation in that it needs to maintain a 15-day to one month holding period, added officials.
Senior GIC officials confirmed that the designated national reinsurance company was in the process of restructuring its portfolio further, stating: "Why should we keep money blocked in companies, which are not paying any dividends? After all, it is policyholders' money". GIC also proposes to get out of short-term, unsecured loans. "Though these offer high yields, they are risky," said officials.
Churning of equity rather than investment based on dividend, yields or average purchase price, will be GIC's future investment strategy, pointed out GIC officials. The corporation is reviewing its investment in companies, which have shown a steady decline in revenue and profits, sources stated. The plan is to review investments in industries, which have shown signs of weakness, and face a grim future. These include old economy stocks in the steel and textile sectors.
Such stocks are not actively traded on the bourses. Of GIC's existing portfolio, just about 100 scrips are highly traded on the exchanges.
