Soaring non-performing assets of public sector banks have not dissuaded Life Insurance Corporation from raising its stake in them over the last one year. The public sector insurer has significantly increased its holding in six PSBs (even as their NPAs figure among the highest) and as their share prices fell by up to 50 per cent, LIC incurred notional losses in them.
Notwithstanding its curious stock picking approach, as the BSE 30-stock benchmark Sensex rose by over 9 per cent between June 2014 and June 2015, the market value of LIC’s holding (in firms it holds more than 1 per cent) rose 2.5 per cent to cross Rs 4 lakh crore for the first time ever.
Analysis of LIC’s shareholding data accessed from Prime Database shows that, of the 10 firms that witnessed maximum stake hike by LIC (in percentage terms) since June 2014, six are public sector banks — United Bank of India, Canara Bank, Bank of Maharashtra, Central Bank of India, Uco Bank and Punjab & Sind Bank.
LIC raised its holding in them in the range of 6.28 to 9.4 percentage points. It is interesting to note that all six banks have witnessed a significant rise in their net NPA levels and five have seen a sharp decline in share prices over the last one year. Central Bank of India is the only exception as its share price rose by 32 per cent during the period.
While, credit rating agency, CARE saw the maximum stake hike (9.93 per cent) during the year, United Bank of India was a close second as LIC increased its holding in UBI from 2.72 per cent in June 2014 to 12.12 per cent in June 2015. The rest five banks occupied the next spots. Coal India, Oil India and Welspun Enterprises complete the top ten.
For UBI, while the NPAs rose from 1.72 to 6.22, its share prices fell 47 per cent between June 2014 and June 2015. Other than these, the top two holdings of LIC — Corporation Bank (22.5 per cent) and MTNL (18.81 per cent) also declined by 55 per cent and 35.7 per cent, respectively, in that period.
The market value of LIC’s holding in June 2014 stood at Rs 3,94,395 crore, it rose by 2.5 per cent to Rs 4,04,269 crore in June 2015. It must, however, be kept in mind that LIC has also booked profit in some of its holdings during that period.
In another curious move, the company which saw the highest decrease in LIC’s holding was Hindustan Petroleum Corp Ltd. LIC decreased its holding in HPCL from 9.54 per cent in June 2014 to 4.02 per cent in June 2015. In the same period, the shares of the oil marketing major rose by 75 per cent to hit Rs 728 per share in June 2015 following softening global crude prices and the government deciding to free the diesel prices.