LIC's bad debt jumped nearly five times 8 years through Financial Year 2019 to 6.15%

The government’s plan to list LIC next fiscal may help unlock the life insurance behemoth’s true potential and ensure greater accountability, but at the moment it’s bleeding from a string of bad investments.

Even as the government has made its intentions clear that it wants to list Life Insurance Corporation of India on the stock exchanges, there are developments related to state-owned insurance giant that will come into reckoning.

Gross bad loans of LIC jumped almost five times in eight years through FY19 to as high as 6.15%.

On top of the pile is the NPA the company has been carrying following investments in many companies going bad. These include DHFL, Reliance Capital and Reliance Home Finance. These have become basket cases and are struggling at the National Company Law Tribunal for insolvency resolution. LIC had a collective exposure of around Rs 11,000 crore in these companies by way of bonds, which have now turned out to be of junk value. Analysts say its non-performing assets (NPAs) may inch up further in FY20, as bonds of companies — including FDHL , Reliance Capital and Reliance Home Finance in which it had an exposure around Rs. 11000 crores. The government’s decision to ask LIC to take over the stressed IDBI Bank has also cost the insurance company dearly since there has not been any qualitative improvement in the financial status of IDBI Bank so far.

For the record, LIC had already accounted for as much as Rs 23,761 crore in the last completed financial year ending March 2019. That has brought down to NPA to 0.27% something that will work favourably now, when it goes for the IPO. LIC would want to further clean up its balance sheet before going in for the listing and IPO.