75% of equity exposure in private sector companies
The LIC has booked profits worth Rs 16,000 crore in equities this fiscal so far, and the yield on investments is 9.65 per cent.
The value of its portfolio (fixed income and equity) in 2000 was Rs 1.5 lakh crore. This appreciated to Rs 12.5 lakh crore as on date.
16% rate of return
Reacting to reports on purported mark-to-market (MTM) losses suffered by the Government-owned insurer, D.K. Mehrotra, Chairman, LIC, said till date LIC had not booked any losses on stocks held by it. (MTM refers to valuation of any portfolio at the day's closing price of all the stocks.) The book value of its investments in PSUs is Rs 56,000 crore and market value Rs 65,000 crore, working out to a 16 per cent ROI (return on investment).
“Nowhere have we suffered any losses. These stocks have shown appreciation cumulatively also. Our average acquisition price for PSU stocks are very low compared to current market prices. Even if I were to exit these scrips today, I would book huge profits.”
“I do not disclose my book values to anybody because the market will get affected if this information goes out,” he said.
Even if LIC were to MTM its entire equity portfolio, it would have a huge appreciation of Rs 1.2 lakh crore, he added.
On LIC buying PSU stocks, he questioned whether anybody in the country can construct an equity portfolio without these scrips. PSUs are market leaders in their respective businesses, he pointed out.
Further, the average duration of LIC’s policies is 15 years and we look to 15-20 years investment horizon, he said.
50% in G-secs
A minimum of 50 per cent LIC’s total portfolio is deployed in Government securities (G-secs). LIC has Rs 7.3 lakh crore in G-secs as of Q2-FY13 (Central & State Government Securities, besides bonds with sovereign guarantee).
The average gross yield on its fixed income portfolio, which includes corporate bonds and loans, is at least nine per cent. On the equity front, 99 per cent of its exposure is in the BSE-200. The book value of LIC’s equity portfolio in Q2-FY12 was Rs 2.4 lakh crore and the market value Rs 3.6 lakh crore.
Seventy five per cent of LIC’s equity exposure is in the private sector. The composition of the portfolio reflects the weightage that PSUs and private sector scrips command in the universe that LIC invests in.
“We are continuous investors in the market and we invest and book profits irrespective of market conditions,” he said.