Life Insurance Corporation of India (LIC [Get Quote]), the country's biggest insurer, said it did not participate in Tata Motors' [Get Quote] Rs 4,145-crore rights issue as the shares continued to trade below the offer price till the last day of the subscription today. The move resulted in the issue devolving on the promoters and the underwriter, JM Financial [Get Quote]. 

Tata Motors' shares ended the day at Rs 243.90, 28 per cent below the offer price of Rs 340 for the common shares.

"We had to drop the investment plans as the share price went down more than the corporation's expectations,'' said a top LIC executive. Last week, LIC had said it would wait till the closing day of Tata Motors' rights issue before subscribing to any share. The insurer followed the same practice, which was adopted for the Hindalco [Get Quote] rights issue last week," the executive added.  

LIC holds about 11.48 per cent in Tata Motors. "LIC ensures that the policyholders' money is safe. LIC always invests with a long-term perspective," the executive added. 

Last week, Tata Motors issued a statement, saying the promoters would pick up the unsubscribed portion of the rights issue, including the shares that are not underwritten by JM Financial. The sole underwriter had committed to subscribe to 67 per cent of the shares with differential voting rights at Rs 305 apiece. 

"As the issue gained a cold response from the investors, the promoters of Tata Motors would have to subscribe to the major portion of the ordinary shares. As per the latest data, a majority of the shareholders were not confident to buy rights at the offer price of Rs 340 a share," said sources close to the development. Over the last month, Tata Motors shares have fallen over 41 per cent on BSE.