The cash-rich Life Insurance Corporation is sitting on . 10,000 crore of the amount it had earmarked for investment in equities this fiscal, which is about to end in three weeks. The amount may not be utilised fully as the recent resurgence in investor interest reduces the government’s dependence on the insurer to bail it out with its disinvestment plan.
LIC has invested . 30,000 crore this financial year so far, most of it in public offers of state-run companies as it shored up the government’s share shale programme that was threatened by tepid investor response in the first half of the year. The government had, in fact, allowed LIC to hold up to 30% stake in listed companies to help it achieve the divestment target.
The government has till now raised . 22,000 crore by selling shares in six companies, including Hindustan Copper, NTPC, OIL India and miner NMDC, helping it contain fiscal deficit at 5.2% of the gross domestic product (GDP). Foreign and high net worth investors lapped up some of issues of NTPC and NMDC, leaving little for the state-run insurer.
The government plans to achieve it disinvestment target of . 30,000 crore by divesting stakes in National Aluminium Company and Steel Authority of India by the end of this fiscal.
Last year, the government was able to raise only . 14,000 crore from disinvestment against a target of . 40,000 crore as weak investor sentiment forced it to go slow on its share-sale plan. LIC had to, in fact, rescue the Oil & Natural Gas issue by buying nearly all of the stocks worth . 12,000 crore. It also stepped in to help the government infuse capital in state-run banks by buying stakes in Punjab National and Syndicate Bank for . 8,000 crore. Besides, it bought bonds worth . 2,000 crore sold by the struggling Air India. LIC has booked a profit of . 20,000 crore by selling equities this year so far, against . 9,000 crore last fiscal.
Source : The Economics Times.
Date : 11/03/2013