FIIs cut, LIC raises stake in Infy during July-Sept

Foreign institutional investors (FIIs) have pared stake in Infosys Technologies marginally during the July-September quarter, but some of its biggest institutional investors — including Life Insurance Corporation of India (LIC), sovereign funds of the government of Singapore and Abu Dhabi Investment Authority — hiked their stakes in the Bangalore-based IT firm.

During the quarter, FIIs reduced stake in Infosys from 36.88 per cent to 36.66 per cent, and the share fell 13.66 per cent from Rs 2,934 to Rs 2,533 apiece.

However, nine out of 10 institutional investors, which held more than one per cent stake in the firm, used the fall in share price to raise their holdings during the quarter, according to the company’s filings with stock exchanges.

Retail investors, who own shares worth up to Rs 1,00,000, pared their stakes in the company by 1,16,798 shares through the quarter, though the number of investors rose during the same period. However retail investors, who own shares in excess of Rs 1,00,000, rose in number by seven to 372, who collectively added a total of 4,56,635 shares during the quarter.

Hemant Kanawala, head of equities at Kotak Mahindra Old Mutual Life Insurance, said institutional investors added Infosys shares as the stock corrected sharply while small retail (investors) sold as they got influenced by the market momentum.

LIC added 35.01 lakh shares raising its stake to 5.49 per cent from 4.88 per cent. Foreign investor Oppenheimer Developing Markets Fund added 1.89 lakh shares raising its stake to 2.71 per cent from 2.67 per cent. Abu Dhabi Investment Authority (bought 19.79 lakh shares) to 2.13 per cent; ICICI Prudential Life Insurance Company (bought 9.65 lakh); Vanguard Emerging Markets Stock Index Fund ( bought 13.51 lakh); government of Singapore (5.45 lakh); Aberdeen Asset Managers (21 lakh); HDFC Trustee Company (5.12 lakh) and Bajaj Alliance Life Insurance Company (82,500).

Only institutional investors to pare stake in Infosys was Franklin Templeton Investment Funds, which sold 14,000 shares).

On an aggregate basis, FII stake in Infosys was down marginally to 36.66 per cent from 36.88 per cent, while the total number of individual FIIs holding the stock came down from 948 to 907.

“When the stock corrected in the last quarter, it was more on uncertainty on FY13 earnings. FY13 earnings estimate continued to be challenging and it will determined only by April 2012,” Kanawala said.

“Because rupee has appreciated 10 per cent, Infosys’ rupee guidance has also gone up. Given that dollar will continue to remain strong, it will help the company,” Kanawala added.

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“The profitability guidance is robust as the EPS guidance in dollar terms has been raised and EPS guidance in rupee terms has been increased significantly due to higher rupee/dollar expectation (48.98 compared to 44.5 earlier),” said Rohit Kumar Anand, an IT analyst with PINC Research.

Online term insurance 8-10% cheaper

To cover your self from unforeseen risks in future, buy term plans or pure insurance plans online as against those sold through regular channels. Term plans sold online are cheaper as insurers pass on the cost saved on distribution (agent’s commission) and are loaded with features.

Term plans sold online are 8-10 per cent cheaper than those sold through an insurance agent.

Most life insurance companies have begun offering term plans specially designed to be sold online. Many companies such as HDFC Life Insurance will begin offering online term plans soon.

Gaurav Rajput, director (marketing) Aviva India Insurance said, “Online plans are cheaper than the ones sold through regular channels because there is no intermediary between the buyer and seller, thus, saving on commission. Also, the marketing costs of the company and perceived risk of death are significantly lower with higher persistency (because they have opted for the product themselves).”

Term plan or pure insurance policies are increasingly becoming popular with increased awareness about the need for life insurance. Term plans do not have any investment components and maturity benefits. To push online sales, insurance companies are adding more benefits to make their online term plans more attractive.

Suresh Agarwal, executive vice-president, Kotak Mahindra Old Mutual Life Insurance said, “In our online plans, we offer two additional features – step up and step down options. Step up option guarantees additional cover at certain important stages in life at a cost in hassle free manner. One can increase the sum assured without having to undergo any further medical examination.”

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Various stages could be marriage, purchase of house in India, birth or legal adoption of a child. A step down plan is subject to lower amount of cover only if minimum amount of cover available in the chosen plan. On stepping down, premium is recalculated based on revised sum assured. This option is helpful since one’s responsibilities don’t remain the same throughout life.

Aegon Religare that introduced first online term plan in the market plans to overhaul its existing online term plan (called iTerm) with more features. “We will soon launch iTerm with more features,” said Yateesh Srivastava, CMO, Aegon Religare Life Insurance.

You can also enhance your life cover by adding riders to the covers by paying a small additional sum. Popular riders include critical illness and personal accident. Basic features of term plans, both sold online and offline, are similar and suicide is excluded.

However, riders may have their own set of exclusions. For example, ICICI Prudential Life insurance lists engaging in aerial flights (including parachuting and skydiving) other than fare paying passenger on a licensed passenger-carrying commercial aircraft as an exclusion in its accidental death benefit rider sold along with iProtect term plan.

Subrat Mohanty, senior vice-president (strategy and product), HDFC Life said, “We have kept exclusions at a minimum for the basic term plan. The one exclusion that we continue to carry is on suicidal deaths. We shall not be liable to pay if death occurs directly or indirectly on account of suicide within one year from inception date or issuance date, whichever is later. There are separate exclusions for riders if opted for.”

LIC increases stake in BHEL to 9%

Life Insurance Corporation has acquired additional over two per cent stake in power equipment maker BHEL from the market for Rs 2,205 crore to become the second largest shareholder in the PSU after the government.

LIC, which had 7.022 per cent stake in BHEL prior to this round of acquisition, bought shares during June last year to May 3 this year to take its stake to 9.052 per cent, BHEL said in a filing to the stock exchanges.

According to the shareholding pattern, the government has 67.72 per cent stake in BHEL, followed by over 9 per cent by LIC and 1.4 per cent by ICICI Prudential Life Insurance. The remaining stake in held by FIIs and the public.

BHEL shares changed hands at Rs 2,057.70 at the bourses during the trading today.

BHEL officials did not comment on the development. BHEL has announced highest-ever turnover of Rs 43,451 crore in 2010-11, registering a growth of 27 per cent over the previous year's. According to provisional figures release by the company, the Profit before Tax had increased 37 per cent at Rs 9,016 Crore, during the year.

The net profit stood at Rs 6,021 crore, an increase of 40 per cent over the previous year. BHEL secured orders worth Rs 60,507 crore in 2010-11 and expects similar order book in the current fiscal also.

The order book continues to be impressive despite many power projects getting delayed due to delay in coal block allotments, company officials had said recently.

In the power sector, the company bagged orders to the tune of Rs 46,393 crore in 2010-11, including those from NTPC, Bajaj Hindustan, Jaiprakash Power Ventures and Raichur Power Company. The company is all set to achieve a manufacturing capacity of 20,000 MW by March 2012 from the current level of 15,000 MW.

BHEL is discussing with various governments including Orissa, West Bengal and Tripura, for joint ventures with entities from respective states. It already has power generation joint ventures with state utilities in Karnataka and Maharashtra, among others.

IRDA issues insurance demat norms

Insurance buyers will soon be able to open demat or 'e-insurance' accounts for their contracts which will allow them to hold policies in electronic form. Having an -insurance account will reduce hassles for buyers as it does away with the need to provide age and address proof every time a policy is bought. It will also save insurers crores in printing and dispatching policies.

The move will bring in benefits similar to the efficiency gains in the capital markets after Sebi introduced dematerialization of equities. Dematerialization in capital markets speeded up transactions, dramatically reduced transaction costs and completely eliminated fraudulent transactions.

Taking a leaf out of the securities market, the Insurance Regulatory and Development Authority wants to create insurance repositories on the lines of securities depositories like the National Securities Depository or the Central Securities Depository. These repositories will be licenced by the regulator and connected to all insurance companies.

"This is one of the most positive steps which will impart efficiency and better customer service," said Sandeep Bakhshi, MD, ICICI Prudential Life Insurance. He said the benefits in terms of convenience to policyholders will be enormous while insurers will save in costs. Since the repository will consolidate all policies under a single account, the family will immediately come to know of the policies purchased by an individual in an emergency.

IRDA on Thursday issued guidelines for creating the insurance repositories and electronic issuance of policies. In the guidelines, the regulator said that it will grant licences to and regulate 'insurance repositories', which will act as service providers to life insurance companies.

The repository will give a unique number to every individual and all his policies will come under that account. It will hold all types of policies, including life, health, motor and group covers. The data maintained by the repository will include history of the claims data of the individual. It will also have the names of the beneficiary, assignees and nominees.

Dematerialized policies will be more liquid than paper policies as these contracts can be easily assigned. IRDA has said that whenever the policies are assigned, the assignee shall have the same rights as the policyholder. According to the IRDA guidelines, any insurance policyholder or a prospective policyholder can open an e-insurance account. Opening an account will require identity proof and address proof.

But not all companies are in favour of full-fledged dematerialization. Some of the players were not very keen to have a depository right now and they wanted only partial demat. Even the Life Insurance Corporation is not keen on giving that option to all policyholders immediately as it has a very large database and has concerns of data security.

BNP Paribas may increase stake in SBI Life JV to 49%

BNP Paribas Assurance, the joint venture partner in SBI Life Insurance, may raise its stake to 49% in the JV at market value as and when regulations allow.

Foreign partners can now hold up to 26% stake in an insurance company. A proposal to increase FDI to 49% is lying with the parliamentary standing committee.

Meanwhile, the Insurance Regulatory and Development Authority (IrDA) is working on the IPO guidelines as the companies complete 10 years. Three companies, ICICI Prudential, HDFC Life and SBI Life, have completed 10 years of operation. As per the current norms, companies can tap the public market only after completing 10 years of operations.

SBI Life is not in a hurry to tap the public market. "We don't need capital at the moment. We have not taken any capital from the promoters in the last three years so here is no hurry to go public," said SBI Life MD and CEO MN Rao.

"We also need to see what the options available are if we list, whether the public is holding 25% or 10%. In case of 10%, we may reduce our stake and so BNP Paribas will have its veto power. But if it is 25% public shareholding, then we don't know who will reduce it."

The company reported 33% increase in net profit to Rs 384 crore during the fiscal year 2010-11 from a year-ago period. New business premium income of the company grew by 7% to Rs 7,572 crore. SBI Life's total premium income went up by 28% to Rs 12,912 crore.

Its renewal premium recorded a growth of 74%, thus the persistency increased by 69% against 58% a year ago. It aims to raise its new business premium growth by 35% and its total premium collection by 32% during this fiscal.

Life insurers' new selling income falls 39% in Feb

New business premium income of life insurance companies fell for the sixth straight month as strict regulations on sale of the once popular Unit Linked Insurance Policy took sheen off investing in insurance products. Insurers collected new business premium of Rs 3,009 crore in February 2011, down 39% from Rs 4,896 crore a year earlier, according to the latest data collated by the industry.

The drop in collection is due to a shift towards straight insurance policies which have regulator-planned investment norms. These have lower-ticket size and not many pension products were sold either during the month. "Pension products contributed 30(%) per cent of the new business premium in the period last year which is missing,'' said India First MD and CEO P Nandagopal.

"Also, ticket size has dropped as industry has moved to traditional products." State-owned Life Insurance Corporation of India's sale plunged 45(%) per cent to Rs 1,296 crore in February. In the corresponding month last year, the company had collected a total new business premium of Rs 2,353 crore. Insurance company executives' said that offering a guarantee of 4.5(%) per cent on pension products is not viable for the industry.

"The product is not attractive with a mandatory two-third annuitisation, return of 4.5(%) per cent and compulsory life cover," said HDFC Life MD and CEO Amitabh Chaudhary. While the private players reported a drop of 33% during the month to Rs 1,713 crore against Rs 2,543 crore in February 2010. Private insurers such as ICICI Prudential and SBI Life reported a fall of 55% and 4% respectively. Generally, last quarter generates 40% of the total new business premium collected during the financial year as this is the tax season and individuals buy insurance policies to get benefit under Section 80C and Section 80 D of the Income Tax Act.