Life Insurance Corporation of India (LIC) will stay within the 15% limit laid down by the insurance regulator for equity investments in companies but might buy a higher stake if it was to spot a good opportunity, chairman DK Mehrotra said on Tuesday.
?We always go to the owners, the government, and we put before them our requirements. They have been good enough to give us a clearance when it was required. I don?t think there has been a dispute on this at any point of time and in future too, if we need to cross 15%, I think if we approach the owners we will get the clearance,? Mehrotra told FE.
Mehrotra also denied being labelled the government?s ?bailout agency? asserting that all of LIC?s investment decisions are based on its own assessment of market conditions and the fundamentals of the company. ?We are not in the business of bailing out. We take a very reasoned decision before entering the market and wherever we get a good opportunity, we participate. Only when somebody sells, somebody will buy and if that is called a bailout, then I can?t help it,? he said.
The insurer will set aside R30,000 crore for equity investments in the next financial year, the chairman said, pointing out that equity investments typically constitute roughly 10% of the investment corpus of India?s biggest insurance firm. ?Our investment target for 2013-14 is likely to be around R2.25-2.3 lakh crore and of that about 10% should go towards equities. In fact, if there are good opportunities, say, some attractive IPOs, we could look at raising that amount to even R25,000-30,000 crore,? Mehrotra said. In 2011-12, the state-run insurer had made total investments to the tune of R1.95 lakh crore and in the current year they will cross R2 lakh crore.
?When we buy a stock, we don?t try to assess the value in the next week or 10 days, we look at it over the next few years. If I have to hold it for a few years before I get the right value for which I had bought it, then I will wait for that period since I am not in a hurry. Maybe our decision has been contrarian at times, but it has helped us all the way,? Mehrotra said.
LIC has, in recent times, bought big chunks of shares in stake sales of government-owned companies, at times when other investors have not found the issue attractively priced or the fundamentals not strong enough. For instance, it bought into Hindustan Copper and miner NMDC this year, which fetched the government R6,700 crore. Last fiscal, it picked up a large chunk of ONGC, buying nearly all the R12,000-crore worth of shares on sale. As per the latest guidelines laid down by Insurance Regulatory and Development Authority (Irda) in February, an insurance company with a controlled fund above R2,50,000 crore will be allowed to take up to 15% equity stake in any single company. Former Irda chairman J Hari Narayan had repeatedly stated that LIC would be treated at par with other insurers when it came to the investment cap. The controlled fund is the total corpus of traditional policies and policyholder funds held by an insurer. LIC?s controlled fund stood somewhere around R13 lakh crore as on January 31.
Late last year, the finance ministry had pointed that as per the LIC Act, 1959, the state-run insurer is permitted to increase shareholding in a single company to 30%. However, the ministry is yet to come out with a proper regulation or guideline in this matter. LIC stepped in when the government could not invest in banks? capital by buying a stake in Punjab National Bank and Syndicate Bank for Rs 8,000 crore. It also bought Rs 2,000 crore worth of bonds sold by the struggling Air India.