LIC is India’s largest life insurer, the name that resounds first in every individual’s mind when we talk about insurance, life insurance. It currently has assets of over Rs 31 lakh crore, not a small number indeed.
It is also famously known as the lender of the last resort to the government, an honor not many corporate entities in India can have. Life Insurance Corporation is also an entity that makes high-profile and large investments in various stocks of multiple state-run entities, mostly listed PSUs.
The reason it invests in these PSUs is to help the Government raise funds (sometimes around 50%). This way, LIC has also been a major help in funding troubled sectors like railways, road, and power. Infact, RBI stated how LIC’s public investment is a whopping 85% of its total investments as of March 2019.
How are things now?
LIC investments are doing pretty well as always, however, its investment in five major PSUs during Modi’s reign are causing concerns.
The five major PSUs
1) General Insurance company New India Assurance Company received LIC investment in November 2017. The investment was made at an issue price of Rs 800 amounting a total of Rs 5713 crore. Yet, as per the latest developments as of 23rd September 2019, the amount has fallen to a current value of Rs 757 crore as the share price fell to Rs 106.85. Here, the value fall was of 86 percent.
2) Another investment along similar lines is General Insurance Corporation, LIC went with investing Rs 5641 crore on October 2017. However, currently, the value of the same investment is reduced by around 50% to Rs 2979 crore.
3) Moving ahead, one major pitfall is LIC’s investment in state-run IDBI bank. In September 2018, LIC invested a huge amount to increase its holding to 51% from an initial 8% in the bank. At that point of time, the investment value was of Rs 21624 crore which has now fallen to Rs 10967 crores, a huge loss in a short span of time.
4) Talking about investments in troublesome companies, LIC invested in NTPC in August 2017. It invested Rs 4275 crores to get more than 40 percent stake in the company. However, once again, the prices have fallen by 30 percent to Rs 3003 crores.
5) Lastly, investments in Hindustan Aeronautics Ltd, made very recently in March 2018 of Rs 2843 crore has also fallen by 38 percent to Rs 1751 crores.
LIC’s investments in PSUs haven’t been doing well except in a few like GRSE, where the only benefit is no losses and very minimalistic gains. The economic slowdown, constant lack of funding and the government’s need for support, LIC has faced quite a few setbacks.
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