By Ruma Dubey

Just as we have this unshakeable staunch perception that anything to do with the Govt, any work that needs to be done, corruption is a part and parcel of the cost; or else your work will never get done.

At the same time, even in this festering cesspool of rot and corruption, two public institutions stand tall, like two lotuses in a pond of muck – RBI and LIC. These two, somehow, maybe it’s been through their work that they have managed to build a sense of trust and faith. LIC is a curious case as it is just like any other mammoth Govt organization. You go to any of their offices to pay a premium, it’s like going back in time with its line-up of metallic, greyish file cabinets, dusty files, fans whirring more heat that air, sweating and harried staff, and yes almost always, an endless queue of customers. Maybe the fact that it has been around for ages or the fact that its image, in terms of trust and cost, today looks much better than the foreign and private sector insurers; all together has gone on to imprint a very trustworthy, conscientious, efficient organization.

For us in the market though, it could be its investing prowess and skills. LIC alone can invest more than the entire Indian mutual fund industry put together and it has an enviable portfolio with sizeable holdings in bluest of the blue chips. It made a profit of Rs.22,000 crore in equity investments in FY15 and that’s really something! Clearly, when it comes to being a mutual fund, it has got probably some of the best money managers. Yes, it needs to time and again bailout the Govt offers but those too have ultimately worked in favor the organization.

Given this background, when we read the story of a scam in LIC, involving equity investments to the tune of Rs.10,000 crore, it first came as a shock and then a deep sense of sadness. It was a feeling of being let down, a “you-too-Brutus” kind of moment.

There has been a news report stating that some officials of the institution have got hand-in-gloves with brokers. These employees of LIC inform the brokers, much ahead of time, about a stock which LIC intends to buy. Brokers take positions and LIC buys at the highest price. At that high price, the brokers sell. Later, the profit earned by the brokers is split with the officials. There are also allegations of where LIC has sold stocks at a lower price and then buying into the same stock when the price rises.

For now, we know only this much. No information is yet known about the name of the stocks, the period during which this was done. Apparently an RTI has also been filed w.r.t this scam but the only response which came from the Finance Ministry, “the matter is being examined.” But at the same time, what it also means is that there was no outright denial.

Some say that these allegations are baseless and what really is the crux of the problem is some correction in procedural lapses, especially in investment decisions. What does that mean – there has been no robbery but surely someone has taken the precious jewellery? And please let’s not get into the debate about 60 years of Congress and all that jazz; the bottomline is that when money is BIG, corruption is also BIG; it does not matter which political party or skin color or caste or nationality. All are the same.

LIC manages some Rs.16 lakh crore of funds. Data in the NSEinfobase reveals that LIC has stake in 33 banks, private as well as public. It holds significant stake in 20 other housing finance, investment and term lending companies.

LIC has stake in 309 companies, spread across 57 sectors. But 90% of this in allocated in some 12 sectors.  Highest allocation is in finance (banks, NBFCs, housing finance), second highest comes pharma and textiles, followed by realty, cement & construction, IT and power. Out of the 309 stakes, those in 172 companies are spread thinly across balance 47 sectors.  PSUs account for 31% of its equity portfolio. Clearly, this behemoth with a great sense of investing is much better than most FIIs.

Thus one can only hope that this news is indeed false and baseless or else, we will be left only with RBI to hold the flag.