LIC Likely to get Additional Time to Pare Down Stake in Firms to 15%

Life Insurance Corporation of India (LIC) is likely to get additional time to pare down its stake in companies where it has more than 15% stake. Sources close to the development said that they may get an extension beyond the December 2018 deadline set by Insurance Regulatory and Development Authority of India (IRDAI).

"Additional time has been sought and if required it will be given," said a senior official. LIC has exceeded 15% stake in companies like ITC, Corporation Bank and L&T.

To avoid concentration of risks and a have a good balance in their portfolio, IRDAI investment norms stipulate that an insurance company should limit their investments in individual companies at 15%.

While it was anticipated earlier that LIC will be allowed to stay above 15%, the regulator has clarified that they will not be given a special dispensation.

Apart from the fact that LIC has exceeded 15% stake in ITC, a public interest litigation (PIL) was filed in the Bombay High Court which has raised concerns about large government entities investing in tobacco companies.

However, LIC had responded to that petition saying that investing in tobacco firms per se is not illegal as per IRDAI norms.

They had also said that they looked at it purely from an investment and returns point of view.

Earlier, during the tenure of J Hari Narayan, the previous chief of IRDAI, there were some differences on the investment cap applicable for LIC. IRDAI had then clarified that investment caps apply to all insurers. The regulator has prescribed norms for equity investments in a company based on the size of the insurer. It ranges from 10-15% depending on the funds controlled by an insurer.

The LIC Act has said that it can invest up to 30% in a company. In most companies, the insurer has stuck to the 15% limit and it is only in a handful of cases that the stake has been increased on account of divestment or similar investment opportunities.