INTERVIEW - LIC says India infra focus to drive stocks growth

A labourer carries bricks at a residential complex under construction in Ahmedabad September 2, 2010.

MUMBAI (Reuters) - India's focus on infrastructure investment will help drive growth in its stock market, a top official at state-run Life Insurance Corporation (LIC), the country's largest portfolio investor, said on Wednesday.

LIC plans to invest 632 billion rupees ($13.6 billion) in government bonds for the rest of the financial year that ends in March, the official said, which is more than the 400-450 billion rupees that some dealers said they had been expecting.

LIC, which plans to issue about $1 billion worth of infrastructure bonds to help fund the country's deficit in roads and power plants, expects to increase its overall investment this year by 14 percent to a record 2 trillion rupees ($43 billion), Thomas Mathew, managing director at LIC, said in an interview.

For the rest of the fiscal year, LIC plans to invest around 430 billion rupees in equities and another 860 billion rupees in debt, of which 632 billion rupees will be in bonds issued by India's central government and states.

LIC had a 71 percent market share for new life insurance business in India at the end of July.

"The infrastructure focus the government has today, the entrepreneurial focus the government has today, will also add to the growth of the India equity market," Mathew said, adding that he is sector-agnostic when it comes to stocks.

India has said it needs to double infrastructure spending to $1 trillion in the five years beginning in 2012.

So far in 2010/11, the company has invested 181 billion rupees in equities, of which 10.1 billion went towards primary market offerings, and 541.7 billion rupees in debt, Mathew told Reuters.

IPOS AND INVESTMENT

LIC is required to invest at least 50 percent of its holdings in bonds, and at least 15 percent of its investment must be in infrastructure.

Mathew said the life insurer is under no government pressure to support its programme to sell stakes in state companies and would only invest in such issues if they are attractive in the long run.

"We do not have any particular preference between PSU (public sector undertaking) and private IPOs (initial public offers). If we have an upside in it in the long term then we will definitely participate," Mathew said.

Last year, LIC invested 610 billion rupees in stocks, of which 104.6 billion went to IPOs, and 1.14 trillion rupees in debt.

The government plans to raise 400 billion rupees through stake sales in state firms in the current fiscal year. It plans to sell stake in 60 companies over the next few years to help bridge its fiscal deficit and raise funds for its social programmes for the poor.

In 2009/10, the government raised 240 billion rupees in stake sales in state companies.

(Editing by Tony Munroe)

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