No hurry to divest stakes to below 10%: LIC

Unwilling to divest in a hurry its holding in dividend-paying blue chip companies, LIC today asked insurance regulator Irda for guidance on how and by when it should comply with the regulation to cap an insurance firm’s exposure in individual firms at 10 per cent.

“If they are changing the goal posts, we are asking them to teach us how to score goals next time,” said T S Vijayan, Chairman of India’s largest insurer LIC, which has equity investment of about Rs 200,000 crore in listed entities.

Stating that the limit was earlier put at 30 per cent, then reduced to 20 per cent and now to 10 per cent, he said, “There have been several limits. We have been law-abiding citizens. We went by earlier laws... But it has changed now, so we are wondering what to do with that. We are discussing with Irda.”

 

Stressing that as a business group, LIC would want maximum time for compliance, Vijayan said, “If you ask me, we would be comfortable with 50 years. We are not setting any time-frame for... It’s all blue-chip companies and very good investment for us...Very good dividend. We are wondering why we should divest. We are not in a hurry.”

Declining to divulge details of its discussions with Irda on the subject, Vijayan said, “I am not competent to comment on that.” There are 10-20 companies where LIC has a holding of more than 10 per cent, he added.

Asked if it was the right time to exit when markets were down, the LIC Chairman said, “It’s not bad time. If you exit from X company at this valuation, you are acquiring Y company at the same valuation. I am optimistic where to put money.”

Referring to the accounting fraud in Satyam, he cautioned India Inc against any wrongdoings, saying LIC has a “long memory”.

“We don’t make a negative list but we have a long memory,” Vijayan said.

Stating that there were huge expectations of the government, policyholders and corporate holders from LIC, he said, “We are number one in financial terms with Rs 800,000 crore assets... Nobody else comes close even near-by... Even banks don’t have Rs 800,000 crore (assets). If you look at corporates, they also come to LIC when they have problems, when they have liquidity issues and when they issue equity. They see LIC as a stabilising factor in their entire portfolio.”

He said that managements know that LIC would give stability to their share prices, unless they underperform or do some manipulation. “Corporates by far know that LIC has a very long memory, we don’t easily forget,” Vijayan added.

Dubbing Satyam as a one-off thing, he said LIC has not faced anyone so far with this kind of corporate wrongdoing and added that when it has big stakes, like 10 per cent in a company, it would like to examine what was happening there. “We do not want board seats unless we have a strategic position, such as in Corporation Bank.”