PSU insurers gain big from ITC; private players turn 'responsible'

State-owned insurance firms, including behemoth LIC, have made huge gains of thousands of crores of rupees with significant investments in cigarette maker ITC even as private insurers and mutual funds have turned 'responsible' by drastically cutting their exposure.

Insurance companies and mutual funds typically use the premium or funds collected from their customers to invest in various securities including stocks to generate returns, but globally many insurers and fund houses have been staying away from investing in sectors like tobacco.

During the last quarter itself, all four state-run insurers in India recorded an appreciation of more than Rs 15,000 crore in their collective ITC holding of over 21 per cent, while the gains have been worth more than Rs 20,000 crore for the entire fiscal 2016-17.

Besides, the government also owns a significant stake worth about Rs 31,000 crore in ITC through SUUTI (Specified Undertaking of the Unit Trust of India) that acts as a holding entity for the erstwhile UTI's investment portfolio.

This is despite SUUTI selling a stake of nearly 2 per cent in ITC recently for about Rs 6,700 crore, following which its holding has now come down to 9.1 per cent in the private sector conglomerate. ITC has market value of close to Rs 3.4 lakh crore for which cigarettes remain the biggest revenue generator despite its diversification into FMCG and other businesses. However, it is Life Insurance Corporation of India (LIC) which has a lion's share of the stake in ITC at nearly 16.3 per cent, which increased by about 2 per cent during the last quarter ended March 31 and is now worth over Rs 55,000 crore, shows an analysis of the company's shareholding pattern.

In addition to LIC, state-run general insurers -- Oriental Insurance Company, the New India Assurance Company and General Insurance Corp of India -- also continue to hold significant stakes in ITC, which are collectively worth about Rs 17,000 crore now.

This assumes significance in the wake of an PIL (Public Interest Litigation) filed in the Bombay High Court against what it calls the government's contrarian policy on tobacco.

The petition has alleged that the substantial investments made by wholly-owned public sector undertakings in the tobacco industry is in contradiction to the anti-tobacco stance taken by the Government of India on a national as well as on an international level.

The petition was filed last week by Sumitra Pednekar, wife of Maharashtra s former home and labour minister Satish Pednekar who died of oral cancer in 2011, top executives of Tata Trust and Tata Memorial Hospital in their individual capacity, among others.

The government-owned insurers have remained invested in ITC for many years now even as an analysis of the company's shareholding data shows that some private sector insurers including ICICI Prudential Life and several mutual funds have pared their stakes fully or substantially in the recent years.