The Hindu Business Line : LIC to expand portfolio of mid-cap companies

LIFE Insurance Corporation of India is looking at expanding its equity investment in mid-cap companies, according to Mr K. Sridhar, Managing Director, LIC.

At present, LIC has investments in 90 mid-cap companies, covering several sectors including steel, pharmaceuticals and chemicals. But the insurer says that the criterion for selection is based on the company's performance rather than the performance of the sector. "We are now trying to look at mid-cap investment and select some good scrips depending on the company, not the industry. Though a particular industry might have a good growth potential, we are trying to look at the fundamentals of companies. Even if companies are doing well in unfavourable circumstances, we are prepared to invest."

LIC's investment in equities accounts for 8 per cent of its total investment. While the book value of its investment in equities is about Rs 32,000 crore, the market value is about Rs 60,000 crore. The company earned a profit of Rs 2,800 crore on its equity investment for 2004-05.

The company holds equity in many of the public sector banks, including Corporation Bank (26.3 per cent), Oriental Bank of Commerce (7.19 per cent), UCO bank (5.18 per cent), Indian Overseas Bank (2.47 per cent), Bank of Maharashtra (2.94 per cent), Dena Bank (1.71 per cent), Bank of India (1.85 per cent), and plans to participate in the IPO of Allahabad Bank.

Mr Sridhar thinks that the PSUs are doing well and it is a mutually beneficial situation, in terms of their bancassurance agreements. "We believe that banks are our partners in progress. Besides, they also get good commission from these tie-ups. For example, Corporation Bank fixes targets for commission every year."

LIC is also a member of the Inter Institutional Group for Infrastructure of banks and financial institutions. The Group's fund of Rs 10,000 crore will be used through a Special Purpose Vehicle (SPV) to complete projects in the sectors of roads, ports and airports. Mr Sridhar says that LIC is keen on participating in as many projects within the cap of 15 per cent, set by the Insurance Regulatory Development Authority (IRDA).

The company's expansion plans are, however, not restricted to India. The Government has granted Rs 260-280 crore for its overseas expansion. LIC has already entered Saudi Arabia and there are enquiries from Nigeria and Egypt.

"The intention is to have a joint venture between a local company and us. They are also asking for composite insurance. So, possibly, the model of a tie-up between New India Assurance and LIC could be the solution to the problem in the future," said Mr Sridhar.

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