LIC plans to launch R500-crore VC fund for core sector

Written by Sitanshu Swain | Kumud Das | Updated: Sep 5 2011, 09:19am hrs
In an attempt to diversify operations, state-owned Life Insurance Corporation (LIC) has decided to sponsor one of the proposed infrastructure debt funds (IDF) and enter the venture capital (VC) business. It has already approached the Insurance Regulatory & Development Authority (IRDA) for its nod to be an IDF sponsor, and will shortly launch a R500-crore VC fund exclusively for infrastructure.

LIC acting chairman DK Mehrotra confirmed the development, adding the VC fund will be launched in the next few days. Our housing subsidiary LIC Housing Finance (LICHF) will float the fund, he said.

When contacted, LICHF CEO VK Sharma said marketing of the fund named LICHF Venture Capital Fund has started and there will be a formal launch this month. The VC fund's focus will be to invest in urban real estate and infrastructure. The idea is to broad-base ourselves, he said. LIC has appointed Arun Goel as the CEO of the fund.

Though LIC will be the sole investor to start with, it could also look at inducting a partner for this venture in future, Shrama added.

Likely partners include banks, financial institutions or even high net-worth individuals.

On IDF, Mehrotra said: We want to participate (in IDFs), but the regulator has to give us some support. At present, we are allowed to pick up only up to 10% in any individual entity. We are in talks with the regulator on the issue so that we can invest a higher amount in IDF.

IDFs are expected to play a key role in making long-term capital available for infrastructure projects.

However, Mehrotra said LIC has so far not been able to invest optimally in core sector industries due to lack of projects. We are allowed to invest up to 15% of our investible funds in infrastructure, but we have invested only 13% in 2011-12. IDFs can be a good business opportunity for banks and insurance companies which are allowed to sponsor them.

IDFs can be set up as trusts regulated by capital market regulator Securities and Exchange Board of India or as companies regulated by the Reserve Bank of India. A trust-based IDF will normally be a mutual fund. Foreign pension and insurance funds are expected to invest in IDFs.

LIC has three subsidiaries LIC Mutual Fund , LICHF and LIC Pension Fund.