The Hindu Business Line : LIC plans to invest Rs 13,000 cr in equities

Life Insurance Corporation will invest around Rs 13,000 crore in equities next year. Mentioning this at a press conference here, the Corporation's Chairman, Mr A.K. Shukla, stressed that LIC's internal budget for next year had yet to be drawn up.

Later on during the conference, Mr Shukla dropped indications that bank stocks would be favoured by LIC.

In the current year, LIC had invested around Rs 10,000 crore in equities. The book value of its equity portfolio is around Rs 38,000 crore, while the market value is about Rs 84,000 crore.

Mr Shukla had recently said the corporation had booked a net profit of around Rs 4,000 crore in the current year from its equity investments.

Asked why LIC had chosen to leave a large portion of potential profits unbooked, Mr Shukla said that profit booking was always done with due reference to asset-liability matching. Asked if the book might not suffer value erosion if equity prices fell, Mr Shukla said LIC's book would not, because "we pick our stocks very carefully".

Later, while answering a question on why LIC would enter credit cards business, Mr Shukla said that the corporation had a good brand name and network and therefore it made sense to get into the business. Then, by the same logic, why would LIC not start a bank? Mr Shukla said that the LIC Act did not permit it.

When asked if LIC had formally thought of approaching the Government for permission, Mr Shukla said, "not yet". Then he quickly added that it made better sense for the insurance major to pick up equity in bank stocks, rather than start a bank by itself.

He said that LIC already had small equity positions in most public sector banks and some private sector banks. He said the corporation intended to raise its holdings in banks to the maximum permitted by the RBI - 10 per cent.

Mr Shukla added that almost all banks had approached LIC asking the corporation to pick up their shares. "Whenever they come out with public issues we will pick up some equity. It is easier that way," he said.

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