Insurance Regulatory and Development Authority chairman J Harinarayan has reiterated that the regulator is not in favour of Life Insurance Corporation’s (LIC) equity holding rising to 30% in a company as it will trigger Sebi’s takeover code — and make the insurer the majority stakeholder in companies that are not directly related to its core business.
Financial services secretary DK Mittal said last month the government was going to notify a hike in the investment limit for LIC to 30% from the present 10%, which was perceived by experts as a move to rescue the government’s disinvestment programme.
“The government has not notified it. It is under examination,” Harinarayan told reporters on the sidelines of a Ficci conference. Insurers and pension funds should be “conservative” in investing in a company unlike venture capital funds that are allowed by Sebi to invest up to 30% in a company, he said.
He said it would be imprudent to raise the investment cap for an insurer to 30% as any company acquiring 25% in a company has to make an open offer for buying another 26% from the public.
The Insurance Act allows LIC to hold 10% in a subscribed share capital of a company or invest 10% of its assets, whichever is less.