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Every investment happens after due diligence: LIC chief

“We have always been a contrarian investor. When the market goes up, we sell... and when the market goes down, we buy,” says SK Roy, chairman, Life Insurance Corporation.

Written by George Mathew
Mumbai | July 1, 2015 1:24:16 am
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Life Insurance Corporation chairman SK Roy has dismissed the “perception” that the corporation was bailing out the government’s disinvestment programme, saying “there’s no data to support this” argument. Stating that the Corporation which manages assets worth Rs 17 lakh crore is set to regain the 75 per cent market share in premium income this year, the LIC chief said in an interview that it has booked a profit of over Rs 24,000 crore from the stock markets in 2014-15 and “every investment decision happens after due diligence.”

“IOC happened in April and we got 50 per cent and the balance was subscribed by others. In Coal India we got 40 per cent. If you see the OFS of last 14 months, we have never got more than 50 per cent of the offered amount,” Roy said. So the question of bailing out doesn’t arise. A bailout happens when the entire 100 per cent is taken by us. There’s no data to support this, he said.

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“We bought Coal India for Rs 358, and now it’s Rs 421. In State Bank QIP of February 2014, we bought its shares at Rs 1,583. After a few months it was trading at Rs 2,700. Some perception is there in people’s mind, but I don’t think it’s data based,” he said.

“We have always been a contrarian investor. When the market goes up, we sell… and when the market goes down, we buy, Last year the trend of the market was a rising trend, so we made unprecedented equity profits,” Roy added.

The Corporation invested Rs 60,000 crore in the stock market last fiscal. On whether LIC will be investing more this year, Roy said, “the general trend has been down, so we have been buying heavily this quarter. It’s very situational.” LIC made a profit of Rs 21,000 crore in 2013-14.

On the Reserve Bank’s complaint against LIC holding big stakes in public sector banks, Roy said, “I don’t want to comment on reports that appeared in the media. All I can say is that we are absolutely compliant… whatever limits regulator IRDA has set for us… five per cent or 15 per cent. Every decision happens after due diligence. So we can’t say we are taking investment decisions without considering these factors. If I am compliant with regulations, I’m ok. I shouldn’t be non-compliant in letter and spirit.”

RBI deputy governor SS Mundra had recently come out against LIC investments saying, “LIC on average holds 9.21 per cent stake in Indian banks… There is a contagion risk or interconnected risk. Suppose the banking sector is not doing well and is in trouble, the equity holding of LIC will see a value erosion.”

“There was a decline in premium of 10 per cent in 2014-15. However, in the latest quarter our inflow was growing at 30 per cent. In May we regained around 130 basis point of market share. We will cross 75 per cent in premium income… we will regain this market share before the end of the year. It was 69.3 per cent in May,” he said.

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