Companies release the shareholding pattern during the results season, which is ongoing. The names of those with a stake of more than 1 per cent in a company are part of disclosures. The LIC stake is based on these disclosures in the shareholding pattern of companies. To be sure, this reflects only the disclosed portfolio, but includes most large companies and can be considered broadly indicative of the trend. Mutual fund portfolios are disclosed every month.
“With the growing heft of mutual funds, the overall share has come down; and the trend doesn’t show signs of abating so long as the retail money keeps flowing in,” said Pranav Haldea, managing director at Prime Database. He noted that while the mutual fund industry may have grown significantly larger as a whole, LIC remains the single-largest standalone asset manager by a distance, with its equity assets being at least double of the largest mutual fund.
Institutional investors typically are seen to exit stocks when trouble hits. However, unlike mutual funds, LIC is not subject to the same kind of redemption pressures or even disclosures, Haldea added. Mutual funds, for example, have to disclose their entire portfolios down to the last rupee on a monthly basis, while to get information on LIC’s portfolio, one needs to look at the shareholding patterns filed by companies in which LIC is a shareholder, according to Haldea.
Based on available disclosures, the total value of LIC’s holdings is ₹15.11 trillion. The largest holding is Reliance Industries (₹1.2 trillion). It also has a stake worth over ₹50,000 crore each in State Bank of India, Larsen and Toubro, ITC, and Infosys. The smallest bets are interestingly in companies with a market capitalisation of less than ₹100 crore.
The smallest of them is Blue Blends (India), which had a market capitalisation of ₹1.7 crore. The LIC stake was 1.4 per cent of the company or less than ₹3 lakh. There were at least seven companies with a total market capitalisation of less than ₹100 crore each. Two of these (Blue Blends and JBF Industries) are suspended from trading by exchanges for regulatory or procedural non-compliance.
Many companies may have been residual investments that continued in the portfolio despite declining over the years and decades during which the underlying business has not done well, suggested Shriram Subramanian, founder and managing director of domestic proxy advisor InGovern Research Services. Quickly weeding out underperformers on a periodic basis may have helped the situation, according to Subramanian. “I don’t think LIC is very nimble,” he said.
An email sent to LIC on May 6 did not elicit a reply.
Dhirendra Kumar, chief executive officer of Value Research, said LIC faces real difficulty exiting many of these holdings. Several of these stocks are too small and too illiquid to sell without moving the price. The deeper issue is structural. LIC is a public sector institution. Any sharp portfolio decision that later looks wrong can invite inquiries and investigations. Officials, therefore, prefer caution over action. Private mutual funds do not carry that constraint. They also operate under continuous public disclosure and market scrutiny, which pushes them to clean up positions faster. LIC has been investing for more than 70 years now, longer than the entire mutual fund industry. An asset manager of that vintage steadily accumulates small residual stakes in a very large number of companies.
“Exiting them is neither quick nor easy,” Kumar said.