LIC to put over Rs 20,000 cr into equities

State-owned Life Insurance Corporation of India (LIC) will pump in more than Rs 20,000 crore in the equity market this fiscal on the back of positive economic environment and will stay invested in the public sector enterprises which have a potential of yielding good returns in the long-term.

Markets have bounced back in recent time. LIC is positive about the economy, which has witnessed sound economic indicators with good fundamentals. We expect that our equity investment of the company would go beyond Rs 20,000 crore this year,” A K Dasgupta, managing director of LIC said on the sidelines of entering into a referral arrangement with Vijaya Bank for selling life insurance products.

The public life insurer will also stay invested in public sector entities as the expected yield on investment is higher in public sector companies.

“We have risen our stake in public sector banks in recent past and continue to invest in public sector IPOs and FPOs,” Dasgupta said.

He, however, said that the company was under no pressure to bail out any public sector company in the wake up of lack of investors’ interest.

Recently, LIC had to step in the market for smooth sailing of the follow-on-public offer of NTPC as institutional investors showed little interest in the offering.

About impact of draft guidelines of Direct Tax Code (DTC) on ULIP, he said that LIC had not witnessed any adverse impact on the growth of Unit Linked Insurance Products (ULIPs) in recent time.

However, the company is waiting for more clarity on the issue of restructuring of unit linked products from the insurance regulator before continuing with some of its old product in addition to launch of new ones.

“There is certain amount of compatibility issue. But, as we have heard from the regulator and finance ministry that ULIP will remain attractive, we expect certain guidelines to come up in near future. However, LIC has not witnessed any adverse impact on ULIP growth in recent time”, Dasgupta, said.

Referring to response for Market Plus -1 scheme, he said, “The response is sound to this scheme as it is good product with old format. However, its continuance beyond June will depend on the revised guidelines from the regulator”

The company, which expects 20-25 per cent business growth this fiscal, however remained non-committal about participation in proposed infrastructure fund by the government.

“We will invest our money where we get good returns. However, we do have a less risk appetite as we have to return the money to insurance holders,” Dasgupta said.

LIC, with a 73 per cent market share in new premium income by March, 2010 , expects to maintain the momentum this fiscal.

“We expect a bancassurance income to reach Rs 5,000 crore this fiscal from present Rs 1,000 crore plus last year”.

LIC has already tied up with nine public sector banks in the referral arrangement and has witnessed good growth in recent time.

LIC had collected a premium of Rs 70,891 crore in FY10 with a share of 65 per cent of the domestic life insurance market.