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LIC not to bail out US-64

Kausik Dutt

The Life Insurance Corporation seems to be in no mood to participate in the rescue operation of the Unit Trust of India's flagship scheme US-64 by seeking transfer of US-64's exposure in equities of some companies to its own books.

LIC chairman G N Bajpai made it clear today that the corporation would not like to transfer "other's liabilities to its books". Bajpai made this remark in response to a query by Business Standard on the status of the UTI's plan to transfer its shareholding in some not-so-hot companies to LIC.

The UTI chairman had gone on record in August, stating that the trust was working on three options, which were transfer of its shareholding in some companies to LIC, sale of some company scrips in the open market if concerned promoters did not want to buy them back, and offloading of shares in companies where managements were not keen on improving performance, even at the risk of destablising promoters.

The first two steps were components of the flagship US-64 fund's rescue plan, focussed on scaling down its exposure in equities.

The last option was aimed at coercing erring promoters to improve performance. US-64 has a 70 per cent exposure in equities worth Rs 128 billion, spread over 1,100 companies.

Bajpai said UTI had not approached LIC on transfer of shareholding in companies so far. But he hastened to add that "LIC would invest at the right price. LIC's policyholders have entrusted their money to us and we should do justice to them. We are not here to shoulder the liabilities of another entity."

Analysts said LIC's tough stand on the issue would leave UTI with no option but to approach the promoters of companies to buy out the trust's holdings.

Otherwise, if UTI attempted to offload these shares in the secondary market, it would lead to a collapse of the counters and would not get UTI good returns, analysts said.

US-64 has exposure in three types of companies. In the first category were big ticket M-Cap firms where US-64 enjoyed a lion's share of their market capitalisation.

The second category consisted of firms having not-so-huge M-Cap but where US-64's exposure was still big. The third comprised underperforming companies where promoters refused to reform.

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