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Monday, September 10, 2012

LIC seeks hike in corporate investment limit to 20-25%

LIC would ideally like to have headroom of 20-25 per cent for investments in some of its investee companies. As of now, it can invest a maximum of 10 per cent in a company, and any exception to this is approved on a case-by-case basis by the Insurance Regulatory and Development Authority (IRDA).

“The matter has been in discussion with the regulator for some time. Let us see how much leeway the regulator wants to give us. My only concern is that this 10 per cent includes historic holdings which we have since 1956. So, for good scrips, I should have some headroom. Otherwise, what will happen is with the amount of equity we sit upon, we will not have good opportunities in the market,” D. K. Mehrotra, Chairman, LIC, told Business Line. Mehrotra also pointed out that he would not like to risk investment in stocks that do not add value for the insurer. This is why LIC has been asking the regulator to give it some headroom, especially where (in companies) LIC has reached the limit of 10 per cent or nearing it, he added.

Asked how much the life insurance behemoth would be comfortable with, he said: “I do not mind 25 per cent. And it is not that if they give 25 per cent I will reach 25. If they give 25 per cent, it will take care of our investment requirements for the next 10 to 15 years.

Lost opportunity

“It is not that any scrip is so attractive that we will jump on it and we also know that the market will be strongly disturbed if we do so. Anything between 20-25 per cent is good enough.”

When it was pointed out that LIC’s request for a stake of over 10 per cent in a company is already being considered on a case-to-case basis, he said by the time a decision was taken, it was an opportunity lost.


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