The government might have gone against the wishes of the two regulators — IRDA and Sebi — in giving special permission to Life Insurance Corporation (LIC) to invest up to 30 per cent in any listed company. The insurer with assets worth over Rs 13 lakh crore, is in no hurry to hike its stake in any company as a matter of routine.
According to a senior LIC official, who didn’t wish to be named, the 30 per cent provision is for the long-term and it has no plans to hike stake in listed companies across the board. “We are aware of the Sebi norms on takeover code where we have to go for an open offer if our holding exceeds 25 per cent. We will be extremely careful in hiking our stakes and in case it is necessary to go beyond 25 per cent we will seek exemptions from the market regulator,” he said.
“This existing 10 per cent cap is too small. In many of the companies, we have already touched that limit because of historical reasons. We have been investing for 56 years so we have asked for an increase in the cap,” LIC officials said. It holds sizeable stake in many listed companies. It holds 18 per cent in L&T, over 25 per cent in Corporation Bank and 11-12 per cent in ITC. It had increased its stake in some PSU banks to around 10 per cent last year.
IRDA chairman J Hari Narayan had recently termed the government’s decision as “imprudent”, adding that IRDA’s interpretation was that LIC should be treated at par with all other private insurers.
But the government was of the view that there were certain provisions, only applicable to LIC as per LIC Act.
A government official said, “When IRDA talks of level playing field, it should be applicable in all the aspects like social commitments, investments and even advertising spend. Why this talk of level playing field only in the case of investment?”
The government has allowed LIC to invest up to 30 per cent in a company against the existing norm of 10 per cent as stipulated in the Insurance Act, 1999 after the Law Ministry clarified that LIC Act, 1956 supersedes the Insurance Act,1999.
He said the LIC Act empowers the government to fix an appropriate investment limit. “When there is a provision in the law, the new