Companies
LIC clocks record share sales in Q1
Summary
Highest gains in first quarter of any fiscal year; insurer sells shares in at least 87 leading Indian companiesMumbai: State-run insurance behemoth, and the largest investor in India, Life Insurance Corp (LIC) witnessed the highest ever gains in the first quarter of a fiscal year, worth approximately $3.16 billion, or ₹25,900 crore. According to a research by Mint based on regulatory filings of 300 companies, in April-June, LIC sold shares in at least 87 leading Indian companies worth ₹25,900 crore—the highest ever for LIC in the first quarter of a financial year.
Through share sales, LIC has booked a profit of ₹30,000 crore in the first quarter alone, surpassing all past records for the first quarter of a fiscal year, according to a person aware of the development.
The insurer, according to the Mint research, yielded maximum gains by selling a bulk of the shares in bluechip companies, including fast-moving consumer goods major Hindustan Unilever Ltd ( ₹1,893.27 crore), Mukesh Ambani-led Reliance Industries Ltd ( ₹1,469 crore), car-maker Maruti Suzuki India Ltd ( ₹1,053 crore), cement manufacturer Ultratech Cement Ltd ( ₹1,312 crore), engineering and construction major Larsen & Toubro Ltd ( ₹1,260 crore), Britannia Industries Ltd ( ₹996 crore) and Bajaj Auto Ltd ( ₹2,025.8 crore).
Besides, as stocks of most leading listed companies posted steady gains during the quarter, LIC, as a part of its investment strategy, sold the shares of food giant Nestle India Ltd for ₹981 crore, NTPC Ltd ( ₹958.8 crore), Titan Co. Ltd ( ₹877.9 crore) and Power Grid Corp. Ltd ( ₹762.5 crore).
Furthermore, LIC pared holdings in HDFC Bank Ltd ( ₹701.6 crore), ICICI Bank Ltd ( ₹574.7 crore), JSW Steel Ltd ( ₹697.4 crore) and state-run mining major NMDC Ltd ( ₹755.8 crore), according to the Mint research.
The insurer, which manages assets of over ₹ 46 trillion, also sold a part of its stake in Siemens Ltd ( ₹657.3 crore), PI Industries Ltd ( ₹608.4 crore), Alkem Laboratories Ltd ( ₹936.3 crore), and Power Finance Corp Ltd ( ₹485.5 crore) during April-June, when market index Nifty-50 rose by a whopping 10.5% and touched a historic high of 1,9201.7 on 30 June.
To be sure, investments in most of LIC’s portfolio companies, in which it monetised stakes, were made several years or even decades ago, at much lower levels.
“This is why actual quantum of profit booking, that is, the difference between the cost price and selling price, could be higher than ₹30,000 crore," said the person cited above.
In fact, most firms in which LIC monetized its investments witnessed significant gains during the June quarter.
Shares of Bajaj Auto rose 20.7%, Maruti grew 18%, L&T 14%, Nestle and Britannia surged 16%, Titan by 21%, Power Grid rose 13%, Ultratech was up 9% , NTPC 8%, and HUL rose 4.6% during the quarter, with most companies earning high double-digit gains in the past one year.
For instance, Ultratech gained 27%, L&T rose 48%, Nestle 19%, NTPC 35%, Alkem Lab 28.7%, Titan clocked 30% return, Britannia was up by 26%, Power Grid 19%, and NMDC surged 51% from a year ago, with most gains coming in Q1.
A Mumbai-based insurance analyst said higher profit booking may lead to better prospects of bonus pay out to participating policyholders of traditional insurance products such as endowment plans, money-back policies, pension plans and annuity. “Also, a part of the profit booking may enable LIC pay better dividends to shareholders," he added. LIC, witnessed 7% year-on-year fall in first-year premium collection to ₹44,837.2 crore in April-June, according to Insurance Regulatory and Development Authority (Irdai).
LIC invests in equities from the money collected as insurance premium from policyholders. According to Irdai norms, at least 50% of the total premium amount must be invested in government securities, or G-secs, at least 15% must be allocated to infrastructure investments, and the balance 35% could be collectively invested in equities, non-convertible debentures, commercial papers, certificates of deposit, mutual funds and other money-market instruments.
According to a Mint report, LIC will invest a record ₹2.4 trillion across markets, including shares of locally traded companies, in FY24.
The Mint research showed that during the first quarter of previous fiscal years, LIC sold equities worth ₹12,195 crore (FY23), ₹19,067 crore (FY22) and ₹7,351 crore (FY21), while there was no stake sale in the June quarter of FY20 and FY19.
This is somewhat in sync with the market’s performance in the previous fiscals.
The Nifty 50, in the first quarter of FY23, lost 9.6%. The bellwether index gained 7% in the June quarter of FY22, 19.8% in the first quarter of FY21, and 1.4% in the June quarter of FY20.
