The Life Insurance Corporation of India (LIC) stepping in to mop up share sales from the Centre year after year, it appears, has led to a significant jump in its investments in public sector enterprises over the past decade. According to data put out by the RBI, of the total investments made by LIC to the tune of Rs 26.6 lakh crore as of March 2019, Rs 22.6 lakh crore pertains to the public sector and about Rs 4 lakh crore is in the private sector.

The proportion of LIC’s investments in public sector entities has shot up to 85 per cent as of March 2019, from about 75 per cent a decade ago. This is a near 15 per cent annual growth in LIC’s public sector investments over the past decade.

The jump in LIC’s share of public sector investments was significant in 2013-14 and 2017-18, when the government sold equity stakes in BHEL, Engineers India, MMTC, New India Assurance, General Insurance Corporation of India and Hindustan Aeronautics. By swooping in to mop up the shares on offer, the insurer in turn, helped the government with its disinvestment targets.

In 2013-14, LIC’s share of investments in public entities shot up to 79 per cent (from 75.5 per cent in the previous year). In 2017-18, the insurer’s share in such investments moved up to a near 84 per cent (from about 82 per cent in the previous year).

Lapping up

In 2013-14, LIC’s investments in public sector enterprises shot up by 17 per cent to nearly Rs 12 lakh crore. The insurer was active in many share sales by the government that year. For instance, its stake in BHEL, Engineers India and MMTC, among others, increased notably.

In case of BHEL, 4.66 per cent of the government’s stake in the company was sold to LIC through a block deal in March 2014. Its stake (including through various funds and schemes) in BHEL went up from 6.8 per cent as of March 2013 to 10.9 per cent as of March 2014. The government raked in Rs 1,886 crore through the block deal.

Similarly, state-owned MMTC carried out a further public offer (FPO) in 2013-14, as part of the government’s decision to divest 9.33 per cent in the company, and bring down its stake to 90 per cent post the FPO. LIC stepped in to buy a little more than half the shares that were on sale through the FPO. The insurer’s stake in MMTC stood at 4.81 per cent post the FPO (from nil in the previous year). Engineers India, too, had an FPO that year, with the government divesting 10 per cent stake in the company. LIC’s stake in Engineers India, inched up to 5.81 per cent in 2013-14 from 2.9 per cent in the previous year.

Bail-out act

In 2017-18, LIC’s investments in public sector enterprises stood at over Rs 20 lakh crore. The insurer played the knight in shining armour to help several share sales by the Centre sail through in that fiscal.

New India Assurance was a case in point. Despite the stiff valuations and weak investor (retail) appetite for the issue, the IPO managed to sail through, thanks to the LIC’s bail-out act. The government reduced its stake in New India from 100 per cent to 85.4 per cent through the IPO, raking in Rs 7,650 crore. LIC, itself, acquired 8.6 per cent stake in the company through the IPO.

In the GIC IPO the same year, the government received Rs 9,700 crore in disinvestment proceeds by divesting its stake in the company (from 100 per cent to 85.78 per cent). LIC alone lapped up 8.42 per cent stake in the company through the IPO.

In the case of Hindustan Aeronautics, the government disinvested about 10 per cent through the IPO that year. LIC swooped in to mop up 7 per cent stake in the company.

As of March 2019, LIC’s investments in public sector entities have moved up further to Rs 22.6 lakh crore. The insurer’s share of investments in the private sector is a little less than 15 per cent currently, significantly lower than the 25 per cent levels of a decade ago.