LIC invests Rs 1.5 trillion in G-Secs, crosses regulatory limits

Mumbai: State-run Life Insurance Corporation, the country's biggest institutional investor, has bought over Rs 1.5 trillion in government bonds so far this fiscal and has reached the cap, apart from being a net buyer in the equities, Chairman S K Roy said Monday.

Roy was answering a question from PTI on why the Corporation has of late been going slow in the government bond market.

"The problem is that there is a cap on our investments, which in the case of the government debt is 50 percent of our total incremental investment. And we have already reached that level," Roy said.

The chairman also said the Corporation has been the net buyer of equities in the current fiscal and has already booked profit worth Rs 10,000 crore so far this fiscal.

The nation's largest insurance company has so far invested over Rs 53,000 crore into equities this fiscal, Roy told reporters after launching LIC's digital initiative wherein a customer can buy, check and claim her policy online.

Roy also said that LIC has pumped in more funds into government bonds this year than it invested in equities.

When asked how much more incremental investment will the Corporation be undertaking, Roy said, "We have set no particular investment target for the year. We have been taking contrarian view on the stock market."

Defending his huge exposure to banks, especially in state-run banks some of whose stocks are trading even below book value, he said the Corporation is not in a bad position due to these investments as "we are in them for the long term.

There are reports that it's the right to accumulate banking stocks".

However, of late we have been increasing our play on IT, pharma and FMCG stocks. But he did not offer more details.

Roy said a slump in the stock markets is an opportunity for LIC to buy.

When asked about investment into railways, Roy said LIC has already subscribed bonds worth Rs 2,000 crore from the national transporter and hopes to subscribe another tranche this fiscal. But he did not say how much that would be. 

LIC had entered into an agreement with Railways earlier this fiscal to fund Rs 1.5 trillion over the next five years as part of part funding the Rs 8.5 trillion investment in Asia's oldest rail network seeks to upgrade its decades-old transport facility.

In FY15, the Corporation netted a 15 percent gain from its equity play at Rs 24,373 crore, as the benchmark Sensex made 25 percent gains during 2014-15, its best show since 2010.

The Corporation, which is the nation's largest institutional investor, had made a profit of Rs 21,257 crore

from the equity markets in the financial year 2014 and Rs 24,373 crore in 2014-15, which is a gain of 14.65 percent.

The returns come even as the Corporation had invested Rs 7,328 crore less in 2014-15 than what it had invested in the previous year. While LIC had invested Rs 54,330 crore into the markets in 2013-14, its investments in 2014-15 were only Rs 47,002 crore, LIC chairman S K Roy had told PTI recently.

With over Rs 2 trillion holdings, LIC is the single largest investor on Dalal Street, having considerable stake in all the blue-chips.

Having over 300 million policyholders and total assets of over Rs 18 trillion, LIC is the largest insurer and any solvency issue with it can really create systemic issues not only for the market but for the entire economy, therefore the worry of the regulators.

As of end March 2015, LIC's holdings in Central and state government securities stood at Rs 10,35,424.86 crore,

Roy had said, adding the Corporation plans to do gross investment of Rs 3.75 trillion in the current fiscal year.