We believe IPO will add value to brand 'LIC' in long run, says its MD Gupta

LIC has registered a 100 per cent growth in profits from sale of equities in FY21 by tapping market opportunities and adopting contrarian approach. "We believe that FY22 will also be a good year in terms of booking equity profits. Businesses have picked up from its lows and we see that lot of companies having strong fundamentals poised for growth, across all sectors," says Mukesh Gupta, Managing Director, LIC, in an exclusive interview with Bizz Buzz

We have taken a contrarian call and have used the market opportunities of buying and selling equities keeping a long term focus, company's strength, industry outlook, movement of share prices and other relevant factors. Also, we have used this opportunity to build up strong long term equity portfolio

As of now, LIC is not considering any revision in its term insurance rates. They will stay the same. We believe that IPO will not have any impact on policy holders as our focus and commitment to policy holders will stay the same

How much net profit booked by LIC on sale of equities as on March 31, 2021? Kindly give Y-o-Y comparative no and the variation in percentage?

As per provisional figures, we have booked a record profits of about Rs 37,000 crore, on sale of equities, this year as of March 31, 2021, as compared to profits of about Rs 18,400 crores made in last year thereby showing a growth of 100 per cent over last year.

What were the reasons behind this?

We have taken a contrarian call and have used the market opportunities of buying and selling equities keeping a long term focus, company's strength, industry outlook, movement of share prices and other relevant factors. Also, we have used this opportunity to build up strong long term equity portfolio.

Do you think FY22 is going to be the best year for LIC in that term? If so, kindly give the reason behind that?

We believe that FY22 will also be a good year in terms of booking equity profits. Though these are times of uncertainty due to second wave of Covid-19 which has not only affected the life of individuals even more than what it did during first wave, but businesses too have got impacted due to lock-down like conditions imposed by various State Governments, however, due to strong economic recovery after the Q1 meltdown in year 2020-21, businesses have picked up from its lows and we see that lot of companies having strong fundamentals poised for growth, across all sectors. Our Contrarian approach will ensure good profits along with building a good equity portfolio for long term.

How much of the equities had been purchased by LIC during FY21? How much for FY 22?

During FY21 we have bought equities of about Rs 94,000 crores. For FY 22, the quantum of purchases will depend on the market movement and opportunities available. As said earlier we tend to take contrarian approach and use the available opportunities.

What is your view on term life which is set to get costlier in the current fiscal? How much is the hike in reinsurance rate for the same? Kindly explain in case of LIC's term plans?

As of now, LIC is not considering any revision in its term insurance rates. They will stay the same.

What was the message for the LIC and how did it change the tack to ensure that its equity portfolio continue to shine?

LIC has continued to follow its strategy of being a Contrarian investor. We followed a two-fold strategy (a) Taking advantage of emerging market opportunities to buy or sell shares keeping in mind the company's financials, industry outlook, share price movement and other relevant factors (b) simultaneously identifying fundamentally strong companies in all sectors and buying into such companies for building a strong long term equity portfolio.

The lockdown had triggered a panic that earnings would collapse as businesses shuttered. So, what did LIC do once the announcement was made? How was the year FY 21?

In March/April 2020 when lockdowns started LIC started taking initiatives to enable our people to work from home, digital outreach for customers was increased, we started initiatives for digitalizing sales process through app called 'ANANDA' and became more active in the investment functions to take advantage of emerging investment opportunities. FY 21 was good as we got best ever First Year premium income of Rs 1,84,175 crores and are maintaining our topmost position among Life insurers with a market share of 66.18 per cent. During FY21 we made gross investments of more than about Rs 5 lakh crores thereby showing a growth of more than 15 per cent over last year.

What is the status of LIC IPO and how will it change the scenario for LIC? What will be the impact on its policyholders?

The IPO process is on and is being undertaken by DIPAM, GoI. We believe that IPO will add value to Brand 'LIC' in the long run. It will not have any impact on policy holders as our focus and commitment to policy holders will stay the same.

LIC was supposed to double its profit in the year gone by. What is the status? How do you see the scenario in the current fiscal?

We have booked profits of about Rs 37,000 crores, on sale of equities, this year as compared to profits of about Rs 18,400 crores last year thereby showing a growth of 100 per cent over last year. We believe that FY22 will also be a good year in terms of booking equity profits. Though difficult times there are green shoots visible which point to strong economic recovery, businesses have picked up from lows of March 2020 and we see a lot of companies having strong fundamentals poised for growth, across all sectors. We see a lot of opportunities for Investment and Profit booking.

Govt has hiked the FDI cap to 74 per cent in insurance. How do you see this development?

We see this a very positive development for Insurance sector. Insurance by nature is very Capital-intensive industry and this will help strengthen the sector and spur a new round of high growth.

How do you see the things going forward as correction may happen in the market?

We are bullish on the Indian story and believe any corrections as minor blips in a long-term growth. Through a challenging environment, we see a number of green shoots in the economy and across sectors with large no of Companies, across sectors, showing resilience and potential for high growth over long term.

What is the target for the current fiscal on various parameters?

As previous fiscal year has just ended, we are in the process of performance review and target setting.

Equity comprises a small portion of the total investment portfolio for LIC. Do you think the strategy may change for the current fiscal?

As a matter of asset allocation normally our equity investment is within 16 to 18 per cent of incremental investment and we believe that there will be no change in current fiscal.

Do you think LIC will be able to shed its stake from IDBI Bank as the share price of the bank has come down than the level when LIC had bought the majority stake into it?

Investment in IDBI bank was a strategic decision and while giving permission to invest the Regulatory authorities had put some deadlines for our reducing the stake. Any decision to divest will be taken at an appropriate time keeping in mind best interests of the policyholders and the regulatory requirements.