LIC invests Rs 3,800 cr in govt's FY13 divestment

Enables govt to take year's divestment total past the previous record of 2009-10

State-owned Life Insurance Corporation (LIC) has played a key role in helping the government achieve its disinvestment target (revised downwards, mid-year) of Rs 24,000 crore for 2012-13.

LIC, which has over 80 per cent share of the life insurance business in the country, has invested about Rs 3,800 crore in six of the seven companies where the government sold stake this year.

The divestment total surpassed the previous record of Rs 23,553 crore in 2009-10. This wouldn't have been possible without LIC playing the role of a white knight. An analysis by Business Standard shows LIC participated in an Offer For Sale (OFS) in six government companies during 2012-13, buying from five to 71 per cent of what was put for auction,putting in Rs 3,814 crore.

D K Mehrotra, chairman of LIC, had recently told Business Standard the company doesn't simply bail out anyone; it examines each issue on its strength before taking a decision to participate, he said.

It emerged today that LIC had invested Rs 1,069 crore (nearly 71 per cent) of the Rs 1,500 crore share auction of Steel Authority of India (SAIL) on Friday. A stock exchange filing shows LIC’s holding in SAIL after the sale had gone up from 5.02 per cent to 9.13 per cent. The insurer had purchased a little over 169 million shares. SAIL closed today at Rs 61 a share, about three per cent lower compared to the disinvestment price of Rs 63 a share.

Earlier, LIC had taken about a third of the shares in the National Aluminum Company (Nalco) disinvestment, a week before SAIL. Shares of Nalco are trading a little more than 10 per cent down to their auction price of Rs 40 a share. It also invested a maximum of Rs 1,760 crore in the disinvestment of NTPC, where the government raised Rs 11,500 crore.

During 2011-12, the insurance major had invested Rs 11,270 crore in the share auction of Oil and Natural Gas Corporation.