The Life Insurance Corporation of India last week bought 2.5 million Reliance Industries shares from the custodian of Harshad Mehta's assets for over Rs 68.75 crore (Rs 687.5 million).

Harshad Mehta's portfolio was attached after the 1992 securities scam and is being auctioned.

The Reliance shares are understood to have been bought for about Rs 275 each.

LIC Chairman S B Mathur confirmed that the corporation had bought the 2.5 million shares in a block deal "at slightly less than the prevailing market price."

The Reliance scrip closed at Rs 285.70 on the Bombay Stock Exchange on Friday.

LIC now holds a little under 5 per cent of the Reliance Industries stock. Mathur had earlier told Business Standard that given the right price, LIC would buy more of Harshad Mehta's portfolio.

This is the second time LIC is buying the Big Bull's equity. In January, LIC bought Rs 200 crore (Rs 2 billion) of stock from the custodian.

The custodian, appointed by the tribunal that heard the 1992 stock scam cases, had called for offers from foreign and local institutional buyers as well as the managements of the respective companies for bulk sales of the shares.

The custodian has been selling Mehta's property and small shareholdings, but the bulk holdings in the portfolio were put on the block recently.

The Supreme Court in August 2001 permitted the custodian to liquidate the broker's assets. It is also selling assets that belonged to Hiten Dalal and Jagdish Gandhi, stockbrokers involved in the scam.

LIC's decision to buy into this portfolio is in line with its plan to increase exposure to equity.

Of LIC's incremental investible funds, over 9 per cent is invested in equity. As interest rates fall, LIC is becoming aggressive in the equity and money markets.

Market players say the state-owned insurer is the only institution capable of picking up such big blocks of shares.

"No other player can fork out the money to pick up these blue-chips. A condition of the sale was to pick up the entire lot," a dealer at a leading institutional brokerage said.

LIC in January bought shares worth Rs 200 crore (Rs 2 billion), including 1.118 million shares of Castrol India, 2.32 million shares of Gujarat Ambuja Cements, 6 million shares of Hero Honda, 630,000 shares of Hindustan Lever, 470,000 shares of ITC Ltd and 730,000 shares of Tata Tea. The insurer had also bid for 450,000 shares of ICICI Bank but was outbid.