LIC's investment in the private sector lowest in 16 years at 14.6%

Meanwhile, the public sector's share of total investments is at its third highest since liberalisation

3 min read Last Updated : Sep 24 2019 | 11:38 AM IST

Data from the Reserve Bank of India’s (RBI) Handbook of Statistics on the Indian Economy reveals that of its total investments, the Life Insurance Corporation of India (LIC) has invested only 14.6 per cent in the private sector.

The LIC has reportedly helped bail out a number of public sector enterprises, as well as banks like IDBI, which may have resulted in a shrinking pool available for the private sector. This in spite of private sector firms outperforming their public sector counterparts.

The S&P BSE PSU index is down 4.9 per cent in 2019 so far. The S&P BSE Sensex, a broader index representative of India’s largest companies, including large private sector ones, is up 8.4 per cent. In fact, the PSU index has underperformed the Sensex in 11 out of the last 16 years.

The private sector share had last slipped below 15 per cent in 2003 when it was 11.68 per cent. It peaked subsequently in 2010 at 25.72 per cent. It has since fallen for 9 years in a row to reach its present level.

Meanwhile, the public sector’s share of total investments is at its third highest since liberalisation. The 85.07 per cent share in 2019 is higher than any year except 2002 (87.15 per cent) and 2003 (87.22 per cent).

The numbers don’t add up to exactly 100 per cent. This is because there are also investments in the joint and co-operative sectors. The two account for Rs 1,098 crore in all. The total investments of LIC are Rs 26.61 trillion. Of this, Rs 26.4 trillion is invested in stock exchange securities. It also has a loan book of Rs 24,909 crore.

A look at the last available annual report shows that the insurer has a majority of its investments in government securities.

“In respect of non-linked business, the LIC earned Rs 1,55,071.90 crore as interest and Rs 9,768.82 crore as dividend, returning a yield of 7.71% for the year. The corporation also earned Rs 455.98 crore in rent from property, Rs 9576.81 crore in interest on policy loans & Rs 20.97 crore as interest on loan on mortgages. Another Rs 19512.94 crore was realized as Net profit from the sale of Equities, government securities and other securities (including amortization) taking the total yield to 8.66%,” according to the 2017-18 annual report.