LIC plans to increase investment in equities

Life Insurance Corporation of India (LIC) is planning to increase its investment in the equities in the financial year 2004-05, after generating a profit of Rs 2,400 crore from equity investments for the financial year 2003-2004.

This is substantially higher than the Rs 900 crore profit registered in the year 2002-2003.

"The corporation has so far invested Rs 22,000 crore of its investible funds in equity, which is at present valued at Rs 45,000 crore due to the strong stock markets. We will keep our investments as per the guidelines of the regulatory authority. Our investments in equity presently stands around nine per cent of our investible funds," said R N Bhardwaj, managing director, LIC told Business Standard.

According to Section 27 (A) of the Insurance Regulatory Development Authority (Irda), an insurance company is required to invest at least 50 per cent of its funds in government securities, 15 per cent in infrastructure and social security and the remaining 35 per cent in the corporate sector.

LICI has invested over Rs 1,59,000 crore in government securities as on March 31, 2004, which accounts for over 55 per cent of its investible funds.

The corporation has recorded a profit of Rs 950 crore from trading in government securities in the financial year 2003-2004.

"We are one of the largest investors in government securities and have invested more than the required amount by the regulatory body. We will continue almost the same investment pattern in the current financial year," said Bhardwaj.

LIC's investible fund at present stands at Rs 3,40,000 crore, an increase of over Rs 60,000 crore over last year.

The insurance giant expects to add Rs 70,000 crore to its investible fund in the current financial year.

"The corporation has significant stakes in various public sector undertakings, including Corporation Bank, Oriental Bank of Commerce, UCO Bank and UTI Bank among others. But Corporation does not want to increase the stakes in these banks," said Bhardwaj.

When asked about the decreasing interest rates, Bhardwaj said, "We have to adjust and accept the reality, though the interest rates may increase by one per cent this year. This is due to the excess liquidity in the system because of the increased forex reserves."