Life Insurance Corporation of India (LIC) has sought the sector regulator’s permission to allow the state-run insurer to continue holding an estimated Rs.5,000 crore of Tata Sons’ debt, according to sources.
LIC purchased the non-convertible debentures issued by the holding company of the diversified conglomerate over the past few years, before Tata Sons became a private company in September 2017. The insurer receives annual interest on the securities.
Insurance Regulatory and Development Authority of India rules don’t allow insurers to subscribe to the financial instruments of private companies. “LIC should be permitted to hold on to the securities of Tata Sons since they have purchased these NCDs over a longer period. LIC has written to the regulator stating this,” said a senior IRDAI official on condition of anonymity.
Investments in private limited companies are not regarded as secured and hence are not approved by the regulator. Insurance companies can invest half their assets under management (AUM) in traditional financial instruments such as government securities, 15% in infrastructure developers and 35% in corporate bonds, equities and other securities.
Tata Sons was converted into a private firm from a deemed public firm after a bitter legal battle with former chairman Cyrus Mistry, who was ousted in 2016. IRDAI is now expected to give a timeline to insurers to reduce their debt in the holding company.
“We have asked all insurers to come up with their exposure in Tata Sons after it became a private company,” said the IRDAI official.