IRDA may allow LIC to maintain its stakes in about 40 entities (investment beyond 15% limit) to avoid a fire sale to comply with the regulatory limit for insurance companies, but holdings can’t be raised any further in some of them such as ITC and Axis Bank where it has already breached the cap. Others in which LIC has more than 15 % include Larsen & Toubro and Corporation Bank BSE -1.83 %. “IRDA has not explicitly said that we need to reduce (our stake) in this or that company,” said LIC chairman VK Sharma.
A strict enforcement of the limit may discourage LIC from becoming the investor of last resort in government disinvestments.
LIC has assets worth Rs 25 lakhs crores and gets incremental new business premium income of close to Rs 1.3-1.5 lakhs crores every year. It recently raised its stake in cigarette maker ITC by 2 % to 16.3 %.The insurer sought regulator’s approval to raise its stake in India’s biggest engineering company Larsen & Toubro by to 20.7 %. The corporation’s total new business income rose 27.22 % to Rs 1.24 lakhs crores in the financial year ended March 31.
In 2013, IRDA revised regulations regarding investments by insurance companies, linking it to the fund size. Insurance companies can increase their exposure in equity in a given company from 10 % to 12% and 15 % depending on the size of their controlled fund.
However, if LIC wants to own more than the prescribed limit of 15 per cent, it has to get approval from its board and the regulator. It can own as much as 30 per cent in some companies under a special dispensation from the government.
