LIC buys 86 percent of Indian Oil Corp shares on offer

MUMBAI (Reuters) - State-owned Life Insurance Corporation of India bought 86 percent of shares on offer in state-run Indian Oil Corp this week, salvaging a $1.4 billion government sale as the market took its biggest tumble in more than six years. LIC, India's biggest investor, has in the past dug into its pockets to prop up government sales, buying up state banks and government mining firms. It heavily supported the sale of Coal India shares in January and the sale of shares in Steel Authority of India (SAIL) last year. The investments have sometimes proved fruitful for LIC, with stock in the State Bank of India, which it invested in in January 2014, up more than 60 percent. However, the extent of its bailout on Monday, according to an exchange filing published after market hours on Tuesday, may revive debate in some quarters over the government's divestment plans and the extent to which sales can continue to be heavily backed by LIC and its quarter of a billion customers. Aneesh Srivastava, ‎chief investment officer at IDBI Federal Life Insurance Co said it would not be easy for the government to meet its $10.5 billion divestment target, but said the fact it has already carried out four sales would help. "The way the government has structured the sales so far they are on target, unless the market conditions really deteriorate. In that case even LIC can't save them," he said. Having announced a move on Indian Oil on Friday, hoping to capitalise on strong refining margins, the Indian government had little choice but to press ahead with the sale of a 10 percent stake in the refiner and fuel retailer on Monday. The sale was undermined by the sharpest fall in the Indian stock market since January 2009. "We have to rethink our strategy," divestment secretary Aradhana Johri said after the sale. "Basically, we have to look at which are the stocks we need to put on the market and where the appetite in the market lies." Next on the stump for the government are sales including a 10 percent slice of Coal India and stakes in NTPC , Bharat Electronics , Hindustan Copper . Officials at LIC, whose stake has risen to 11.11 percent in Indian Oil from 2.52 percent, did not immediately respond to requests for comment. Its officials have said in the past that it carries out its own due diligence and checks, but sees itself as a long-term holder and is not concerned by short-term market fluctuations. (Reporting by Himank Sharma and Clara Ferreira Marques; Editing by Biju Dwarakanath and Michael Perry)