Showing posts with label PSU. Show all posts
Showing posts with label PSU. Show all posts

Thursday, December 06, 2012

LIC: INVESTMENT

LIC’s market investments are well timed, apart from IRDA norms

The investment may seem to be huge, but considering the Rs.8.06 trillion asset portfolio of LIC, out of which it is entitled by IRDA norms to invest 35% in equity along with mutual funds, corporate loans, FD, et al, the investment amount is reasonable enough.

A simple evaluation shows that out of the 35% allowed in equity et al, even after Rs.170 billion investment in the equity market, LIC would still have a surplus of Rs.2.6 odd trillion, which it can utilise for corporate loans and fixed deposits. In addition, LIC is all set to raise its fresh premium income by around 40% in FY ‘10 from the current Rs.110 billion (thanks to PSUs, which are expected to raise gratuity liability cover from Rs.0.35 million to Rs.1 million). Of the promised investment amount, Rs.40 billion would be infused by the end of March 2009. LIC has equity investment of about Rs.2 trillion in listed entities.

The only hurdle which LIC could face is from the IRDA (Insurance Regulatory & Development Authority), which caps the firm’s exposure in individual firms at 10% (LIC’s stake in several companies exceed the limit) earlier the limit was 20% (down from 30%). LIC has exceeded the limit and it will have to lobby with the IRDA to relax investment norms (as it has done for infrastructure companies). Apart from this bolt from the regulator, LIC’s aggressive investment in the bourses seems logical and well timed. That should be a boon for policy holders who have gone for equity linked plans.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

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Tuesday, November 27, 2012

OIL BONDS: COMPANIES

RBI's moves with respect to bonds for oil companies are only a temporary solution to the problem

The bonds did solve some of the cash requirements but that was only for the short-term. The bonds can in no way help bridge the global and Indian retail oil price gap, which is the real problem for these companies. "Issuance of bonds is not a solution to the cash starving oil companies; rather this would further burden the companies and the economy as a whole,” Ashok Jainani, VP, Khandwala Securities Limited had said to B&E. Secondly, the government should not have closed the special window, not at least for now. India is sitting on a huge pile of forex reserve ($297.3 billion for week ended August 15, 2008). In such a case, the RBI could, and should have continue with its special window for some more time. This would not only provide support to oil companies but would also help in curbing the devaluating rupee.

RBI is also planning to issue further bonds of Rs.946 billion. But Jainani feels that is not the only remedy we should be looking at. According to him, "remedies like reduction of duties on oil and sale of strategic interest in PSUs to meet revenue loss, hike in tax rates for corporates, and widen the net to cover hitherto exempted sectors and imposition of oil cess are better options for the government." But then, the government seems to be too focussed on continuing with its ''divine'' intervention policy, which seems to be anything but a blessing.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
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