LIC still hopeful of equity cap increase

Not necessary for company to go for a listing at this juncture

Life Insurance Corporation of India (LIC) is still hopeful that the insurance regulator will consider the proposal to allow equity exposure in one company to more than 10%. LIC Chairman D K Mehrotra said that the present 10% cap restricts participation in equity market and that they have presented their case to the regulator.

"Presently there is a lack of headroom in good investable companies due to the existing cap. We have spoken to the regulator in this matter and we would be happy if the cap is increased to even 15% or 20%," said Mehrotra on the sidelines of a FICCI Capital Markets conference.

 

Mehrotra added that though the recent proposal of the insurance regulator to put equity cap at 10% of the total funds has given them a little more head-room, he explained that this would not be substantial going forward in the next five to ten years. The recent draft guidelines on investment by Insurance Regulatory and has mentioned that a life insurer can invest 10% of the total funds in equity.

He further said that they have not yet been approached by the government to pick up the latter's stake in Axis Bank, L&T and ITC, which are now held by the Special Undertaking of Unit Trust of India (SUUTI), but informed that if asked to do so, they would definitely look at it.

On the investment plan for this year, the LIC Chairman said that they planned to invest a total of Rs 2.4 lakh crores in bonds, equities and government securities in the current financial year. Of this, he said that about Rs 65,000 crore has already been invested, comprising Rs 7000-8000 crore equity investments. He expected LIC's corpus to grow from the present Rs 12 lakh crore to Rs 32 lakh crore by 2020.

On the infrastructure sector front, Mehrotra opined that though the government had introduced relaxation proposals including investing in AA rated bonds and introduction of a Special Purpose Vehicle, he said that he was seeking more relaxation to invest in infrastructure.

While Irda has introduced a new draft for product design, Mehrotra opined that they needed sufficient time to refile products and that this should be done in a phased manner. On passing on the additional service tax burden on customers, he added that this would be done in a gradual and phased manner.

Though a number of life insurance and general insurance companies are looking to come up with a public issue, Mehrotra informed that they were comfortable with their present status and felt that it was not necessary to go for a listing at this juncture.