Life Insurance Corporation of India (LIC) has booked profits on equity investments and turned net seller in the ongoing bull run. The company, which targets to invest Rs 60,000 crore in equities this financial year, has invested only a third of the amount (Rs 19,347 crore) in the first six months.
Market officials believe that LIC may be conserving its money power for eventual investment in the government’s divestment programme, including the coming Coal India initial public offer.
A senior LIC official told Financial Chronicle that the company sold stocks worth Rs 22,600 crore in April-September this year, against Rs 11,250 crore sold in the same period last year. The profit made from selling equity has doubled to Rs 9,044 crore from Rs 4,500 crore in the corresponding half of last year.
Of Rs 19,347 crore invested in equity in the first half, Rs 18,632 crore went into the secondary market and Rs 715 crore in the primary market. The corresponding figures of last year were Rs 18,835 crore, Rs 18,200 crore and Rs 635 crore.
Leading investment bankers say LIC has been selling in the market to accumulate cash for the coming Coal India public offer, which will open on October 18 and close three days later.
Going by market perception, LIC is gearing up to take part in the government’s divestment plan. “LIC is a contrarian player in the market. It invests when the market is down and books profit in a bull run,” said Ramanathan K, chief investment officer of ING Investment Management India.
“LIC is a continuous seller, LIC might be saving for the Coal India issue,” he said. Anita Gandhi, director and head of institutional business at Arihant Capital Markets, also said LIC had been a net seller in the past two months.
The government has set a target of raising Rs 40,000 crore from divestment this year and so far it has garnered just around Rs 2,000 crore from the SJVN and Engineers India issues.
LIC’s cash pile is rising not only from booking profits but also from higher inflows of premium income. According to an Edelweiss report of October 1, LIC collected Rs 7,600 crore in fresh insurance premium in August.
Besides Coal India’s mega issue, the government has already announced divestment plans for SAIL, Hindustan Copper, Power Grid Corporation, Manganese Ore and Power Grid Corporation. ONGC is another company where disinvestments plans are in the final stages but its issue may hit the market only in March.
Source: Financial Chronicle