SITANSHU SWAIN, Financial Express 22/6/2011
Streamlining its equity portfolio, Life Insurance Corporation (LIC), India’s largest capital market investor has decided to knock off 57 illiquid scrips. While the company periodically reviews its market exposure, this is the largest tranche of stocks being removed at one go.
“We take this kind of decision on the basis of prevailing market conditions. Normally, we go by the definition set by Sebi for choosing illiquid stocks. This is one of largest blocks of stocks we have pruned from our equity portfolio to make it more productive,” said a senior LIC official.
Without specifically naming the scrips, the official said some of the better known companies in the illiquid list include Gokaldas Exports, Sundaram Finance, Cinemax India, JMT Auto, Crisil, Godfrey Phillips and Oriental Hotels.
According to the official, the corporation’s decision was necessitated by the bearish market. With the dip in combined daily average volumes on both exchanges, illiquid counters have naturally suffered the most. The number of illiquid scrips on the Bombay Stock Exchange and National Stock Exchange has risen sharply in the past six months.
According to Sebi data updated till April, 3,000 out of 5,069 listed companies were illiquid, most of which are listed only on BSE. In NSE, out of its 1,578 listed stocks, the number of illiquid scrips is only 120.
Two years ago, LIC set up an investment monitoring and accounting department, which also helps ensure the portfolio is churned regularly. LIC recently changed its practice of holding scrips indefinitely.
The government has appointed a committee headed by former RBI deputy governor Vepa Kamesam to, inter alia, figure out how LIC manages its stock market exposure. Former chairman and current managing director TS Vijayan had also reportedly come under fire for not optimising the company’s investment portfolio.
Last fiscal, LIC on net basis invested R43,000 crore in equity markets. By churning its portfolio, the corporation booked a profit of around R17,000 crore in 2010-11 as against R9,400 crore the previous year. As on March 31, 2011, on a mark-to-market basis, LIC’s equity portfolio has registered a growth of 69.71% in 2010-11.
LIC’s gross investment during 2010-11, under all funds taken together, crossed R1,96,000 crore and during the year, the total investment income was R91,688 crore.
Also, by maintaining a tighter control, LIC’s gross NPA was much lower at Rs 751 crore. LIC’s gross and Net NPAs as on March 31in terms of percentage were 0.99% and 0.31% respectively.
The corporation’s pension & group schemes (P&GS) portfolio witnessed substantial growth, with fresh investment during 2010-11 crossing more than R40,000 crore. For the third year in succession, LIC could maintain its yield on P&GS fund and increase it slightly up to 9.66%
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