Mumbai: The largest insurance company in India, Life Insurance Corporation of India (LIC), has increased direct investments in non-convertible debentures (NCDs) of companies this year.

NCDs are bonds that private companies issue to raise money from medium to long-term investors. NCDs normally are attractive only if they pay double-digit interest and hence private companies remain averse to issuing these.

LIC executive director (operations) N Mohan Raj said the corporation has seen a definite increase in the number of private companies approaching it for investment in NCDs and rated papers. Many companies had approached LIC in the past few months after access to overseas markets was restricted and local banks were squeezed for funds.

During April-November this year, LIC invested Rs 23,190 crore in NCDs and plans to invest another Rs21,810 crore in the remaining months of this fiscal, taking the total investment in NCDs to Rs45,000 crore by March, a 300-per cent rise over the last year. LIC gets an 11-13 per cent assured return on NCDs.

Even the mobilisation from its new scheme, Jeevan Aastha, which guarantees benefits on maturity and death, will be invested in debt instruments as returns are guaranteed. Of the Rs25,000 crore it has targeted from the new scheme, 50 per cent will be invested in government bonds while the balance will be invested in other debt instruments.

LIC has invested Rs102, 476 crore of its funds until November this year compared with Rs97,738 crore a year ago. The break-up includes Rs 36,311 crore in government bonds, Rs23,190 crore in debentures and bonds, Rs12,372 crore in infrastructure, R 1,342 crore as project loans, Rs164 crore in IPOs and Rs29,000 crore in equities (secondary market).

While it plans to invest around Rs 12,000 crore more in equities, total investment for 2008-09 is pegged at Rs 160,000 crore.

On the other hand LIC's investment in initial public offers (IPOs) issued by companies has dropped to Rs 164 crore so far this fiscal due to fewer public offers being issued.

LIC is also planning to increase it exposure to the stock market and plans to buy stocks worth Rs 12,000 crore from the secondary market before the end of this fiscal, said Mohan.

LIC may invest a total of Rs 40,000 crore in equities during the current fiscal itself, said Mohan and is awaiting a reply from IRDA on its request to hike the cap on investment in an individual company.