* Life Insurance Corp can own 30 pct stakes in companies, vs
* Move seen aiding govt's privatisation plan
(Recasts lead, updates with quotes, details, background)
By Arup Roychoudhury and Rafael Nam
NEW DELHI/MUMBAI, Nov 21 (Reuters) - India is to allow
state-run Life Insurance Corp (LIC) to triple the maximum stake
it can hold in other companies to 30 percent in a move seen as
helping a government sell-off of its own holdings in a range of
India plans to raise 300 billion rupees ($5.45 billion) via
share sales in private companies by the end of March next year,
a crucial part of efforts to contain a widening fiscal deficit.
The government said on Wednesday it would kick off sales by
offloading a stake in Hindustan Copper on Friday and
in two more state companies by next month.
A market rally earlier this year has stalled and analysts
said the government may be looking to LIC to support asset
prices as it targets a budget deficit of 5.3 percent of gross
domestic product this financial year.
India's largest insurer has previously bailed out the
government in share sales that failed to generate sufficient
demand, including buying most of the shares in a $2.6 billion
stock auction from Oil and Natural Gas Corp in March.
"The government needs money, markets are not supportive,
time is running out, valuations are not attractive for the
government," said Mehraboon Irani, the head of private client
group at brokerage Nirmal Bang.
Irani said LIC could potentially buy shares in companies at
higher prices than would be acceptable to markets.
Standard & Poor's and Fitch Ratings cut India's sovereign
ratings outlook to 'negative' this year, putting the country at
risk of losing its investment grade category.
Pressure on the government has grown after an auction of
second-generation mobile phone licences this month attracted
just a quarter of the targeted amount.
Last month it dropped plans to list steel maker Rashtriya
Ispat Nigam after disagreements over pricing with investment
Increasing the amount that LIC can hold in companies was
expected since the insurer already owns stakes above 10 percent
in some firms including state-run State Bank of India.
Mohd. Haleem Khan, India's secretary at the department of
disinvestment, said the government would sell a 4 percent stake
in Hindustan Copper, valued at nearly 9 billion rupees at
current market prices, through an auction.
New Delhi also plans to sell stakes in miner NMDC Ltd
and explorer Oil India before Dec. 20, Khan
India's benchmark BSE index has fallen 1.6 percent
since the start of October, hit by a weaker global markets and
worries about the country's ability to pass fiscal and economic
reforms, but is still up 19.5 percent this year.
"It is definitely positive for the market and the
government," said G. Chokkalingam, Chief Investment Officer at
Centrum Wealth Management.
"Pressure on the market will come down," he also said,
referring to market worries of big shares hitting the market.
LIC's investment income, which comes mainly from equities,
has grown from about 322 billion rupees in the year ended March
2006 to 777 billion five years later.
($1 = 55.0950 Indian rupees)
(Additional reporting by Abhishek Vishnoi, Manoj Dharra, and
Sumeet Chatterjee in MUMBAI; Editing by David Cowell)