Life Insurance Corporation of India (LIC), has again lived up to its billing of being the white knight in big government disinvestments. The latest case being the recently conducted Rs 5,000-crore stake sale in power utility NTPC.
Thanks to its big-ticket application in the company's offer for sale (OFS), the state-owned insurer's stake has increased by 3.9 percentage points to 12.98 per cent in NTPC. It took a little over 60 per cent of the shares in the disinvestment, ensuring the divestment went through.
Other recent instances where LIC has helped or is helping the government or a government-owned entity with their fund raising plan is on IDBI Bank. The lender will soon issue shares worth Rs 1,500 crore to the insurance behemoth, on a preferential basis. The bank is raising money through a new issue of equity shares to meet capital requirements for business growth.
While it has often been labelled a 'bailout agency' of the government, LIC has maintained these were decisions it took on the merits of the company, the issue and pricing. A senior official from LIC explained that as a long-term investor, they act and after a detailed assessment by an internal team. As a contrarian investor, LIC tends to sell in a rising market and in a falling market, they tend to buy.
Earlier disvestments have been aided by LIC's participation. In August 2015, it bought 86 per cent of the shares on offer in state-run Indian Oil Corporation. In January 2014, it made a significant investment in State Bank of India's qualified institutional placement, at about Rs 1,600 a share.
Recently, LIC chairman S K Roy said it had invested Rs 53,000 crore in the current year in equity purchases, compared to Rs 39,000 crore last year. Profit booking had been Rs 10,000 crore in this year. In 2014-15, the insurer had booked an all-time profit high in this portfolio, of a little more than Rs 24,000 crore.