IRDA sets new norms: How much will LIC offload?

By Sajeet Manghat , CNBC-TV18:

Insurance Regulatory and Development Authority,  IRDA ,  has announced fresh investment guidelines that seek to create a level playing field between private players and LIC  (Life Insurance Corporation). The biggest impact of these guidelines will be on LIC. Earlier LIC was allowed to hold up to 30% of stake in any company but now it may be able to hold only up to 10%. It may have to dilute stake in companies where holding is more than 10%. LIC currently holds more than 10% in companies such as Ranbaxy , Mahindra  and L&T .

Company                      Stake (%)

 L&T                                16.78

 ITC                                 14.35

 M&M                               17.49

 Ranbaxy                         15.01

 ACC                               15.93

Will LIC bring down their stake?

In accordance to the new norms LIC will have to divest any stake above 10% that it holds. LIC may have to sell Rs 13,897 crore worth of stocks to comply with the new guidelines. It may also have to reduce its stake in LIC housing Finance and may sell about 30% stake in that company. However, if LIC is exempted from diluting its LIC housing stake, as it is the promoter, the fugures get reduced only by Rs 800 crore odd.