Investments made by the Life Insurance Corporation of India (LIC) in government securities stood at Rs 2.81 lakh crore in the period of April-January FY20 higher than the target of Rs 2.55 lakh crore. In the last financial year, LIC had invested Rs 1.91 lakh crore in government securities. However the life insurance behemoth purchased Rs 46,850.33 crore in equities till January this financial year as compared to Rs 59,115.67 crore seen in last fiscal.
On Friday, LIC announced its business performance and posted its first year individual new business at Rs45,199 crore in the period of April-January FY20 as against Rs38,474.56 crore for the corresponding period last year, a growth of 17.48%. LIC’s total income grew to Rs2, 97,017.28 crore for the period ending Q2FY20, up 17.79% from Rs2,52,149.60 crore registered in the corresponding period a year ago.
According to senior officials, LIC has booked profits of over Rs23,000 from equities in this financial year. Speaking to media with regard to its initial public offer (IPO) in future, MR Kumar, chairman of LIC, said that there are a lot of figures floating around the market capitalisation and size of IPO. “We have not done the maths. Unless we do our internal discussion and maths, I don’t think we would be able to answer that today. Valuations has to be reasonably, scientifically, and a lot of work has to be done,” he said.
LIC chairman also said that the insurer will be talking to their employees and the proposed IPO will not lead to privatisation of the insurer. “I would say that there are talks of privatisation. The economic affairs secretary has already clarified that this is nothing to do with privatisation and government will divest part of its holding in LIC. There are many PSU banks, and even New India Assurance and GIC Re are listed, but they continue to be government entities,” added Kumar. He also said that there is no problem for staff and they will continue to be with the LIC, which is more or less wholly controlled by the government.
Recently around one lakh employees had staged demonstrations across the country against proposed stake sale announced by the finance minister in the Budget. On the high non-performing assets (NPAs) in the insurance company, LIC chairman said, “If we you look at stress in any of the banks it is quite different from the one which we have in insurance companies. While for banks most of it is corporate debt, for us most of our investments comprise government securities, equity and a small portion of corporate debt. This 6% is part of corporate debt, but if you look overall its hardly 1% and we make provisions for everything.” According to the annual report of LIC 2018-19, the gross non-performing assets was 6.15%.
LIC is also planning to reduce its stake in IDBI Bank over the period of time and not wait for 12 year timeline given by The Reserve Bank of India (RBI) to bring down its stake from 51% to 15%. “We have 51% stake, government has also announced in this year Budget that some disinvestment is going to happen from the government’s side. Timeline to bring down the stake has not yet fixed by Irdai to below 15%, however RBI has given the 12-year period. We may not want to wait for that long, specially if we are also going to be listed.” He also added that once the bank comes out of PCA and start lending, I think profitability will go up substantially.