LIC hikes stake in select blue chips beyond 10%
While IRDA last week said it would give reasonable time to LIC to adhere to the investment restrictions, that, however, seems to have encouraged the latter to make quick acquisitions in select stocks where it holds less than 10% equity.
The strategy, according to market sources, could be to take advantage of the beaten-down valuations to make some capital gains subsequently when market conditions improve, before bringing the stakes below the prescribed limit.
LIC has made fresh investments in companies like Siemens, PTC India, Tata Power and Cipla in which it now holds more than 10% stake each. Based on Wednesday's closing, the combined value of the institution's additional investments in these companies amounted to nearly Rs 800 crore.
A senior LIC official told ET that the Corporation treats its strategic investments and investments by unit-linked investment plans separately.
While the strategic holdings are not traded, investments by some of the funds could rise or fall. "It's possible that in some companies, the total investment would have crossed 10% in the second quarter because of increased investment by some of the Ulip funds," said the official.
The official said that IRDA norms came in August and some of the investments could have taken place before that.
According to disclosures filed with BSE, LIC bought 97,34,113 shares of Siemens between February 6 and September 5, 2008, resulting in a hike in its stake from 7.7% as on December 31, 2007 to the current 11.3%. The company's shares have tanked nearly 30% in the past one month.
PTC India and Tata Power are the two other notable examples where LIC now holds a little over 10% after acquiring additional shares in September. The stocks of these companies have lost 18% and 12% respectively in one month.
With these latest acquisitions, the number of companies where LIC holds 10%-plus stake has gone up. There are many other blue chip companies, including Tata Motors, Tata Steel, Corporation Bank, Ranbaxy, Cipla, M&M, Maruti Suzuki, Dr Reddy's Labs, MTNL, HPCL Oriental Bank and Reliance Infrastructure where the insurance major holds more than 10% stake over a period of time. LIC would have to eventually reduce its stake in these companies to comply with IRDA guidelinesulator