LIC May Sell Rs 7,600-Crore Stakes To Meet Regulatory Requirements 

State-run Life Insurance Corporation of India may have to sell around Rs 7,600-crore equity holdings in companies where it does not hold strategic interest to meet regulatory requirement.

The Insurance Regulatory and Development Authority of India had in April issued an advisory to LIC to pare stake below 15 percent in such companies.

India’s largest life insurer holds over 15 percent stake in 10 companies, including its subsidiary LIC Housing Finance Ltd., cigarette maker ITC Ltd., infrastructure giant Larsen & Toubro Ltd., Corporation Bank, and rubber and tea plantations owner Cochin Malabar Estates and Industries. The insurer did not say which companies it plans to sell stake in.

“We’ve replied to them (IRDAI), but again, we cannot disclose it because it is a price-sensitive information,” said chairman VK Sharma at a media conference in Mumbai. It’s not required to sell stake in LIC Housing Finance since the insurer is the promoter, and in Corporation Bank as it’s a strategic investor, Sharma said.

According to BloombergQuint’s calculations, the total value of LIC’s excess stake in such companies is around Rs 7,615 crore. The value has been calculated using the weighted average price of the stock.

LIC did not immediately respond to a query by BloombergQuint on the estimated value of the excess stake.

The insurer has already pared some stake and the rest will happen through “specified block deals”, said Abizer Diwanji, the national head of financial services at tax advisory EY. This will be done through managed transactions so that the companies’ market capitalisation does not take a hit, he said.

“This will be a mere change of shareholders and it will be a gradual process,” said Avinash Gorakshakar, head of research at brokerage Joindre Capital Services. The stake will be sold through an internal transfer arrangement with local institutions, he said.

IRDAI has not given any specific time frame for the stake sale.