Mumbai, Nov. 21: The Life Insurance Corporation (LIC) has sprung to the rescue of India’s cash-strapped corporate giants.

The public sector financial institution will be investing over Rs 25,000 crore in the non-convertible debentures (NCDs) floated by Indian companies this financial year.

The country’s largest life insurer has been inundated with applications from companies, including heavyweights such as the Reliance group, over the last two months as the deepening credit crisis forces India Inc to look for new sources of funds.

Typically, the LIC is investing in NCDs — which cannot be converted into equity — at interest rates varying between 11 per cent and 13.5 per cent for tenures of five to 10 years.

“The number of applications that we receive from corporates for NCDs has doubled. The who’s who of corporate India has initiated discussions with the LIC to raise funds,” said LIC executive director (investment operations) N. Mohan Raj.

Mohan Raj refused to divulge the names of the companies to which the life insurer has provided funds.

It is learnt that the LIC has subscribed to NCDs issued by Tata Motors after the company's rights issue devolved. It has also subscribed to the NCDs of a clutch of other Tata group companies, including Tata Steel. It has also put money in the Tier II capital of several banks.

“Investing in corporate debt is not a new phenomenon but this year we are seeing far greater opportunity to invest in the long term as the IPO and secondary markets dry up. We have so far subscribed to NCDs of Indian corporate houses amounting to over Rs 20,000 crore this year. I expect that this figure will cross Rs 25,000 crore by March 31,” Mohan Raj said.

The LIC is sector-agnostic when it comes to investing in corporate debt.

“We look at the company's historic performance, rating as well as the tenure of the loan while appraising a proposal,” he said. The LIC had an asset base of Rs 8 lakh crore as of March 31, 2008.

Out of its investible surplus, the life insurer typically invests 25 per cent in government securities, another 25 per cent in state government and other securities, not less than 10 per cent in infrastructure, and 5 per cent in housing.

In addition, it invests 35 per cent in different asset classes, including equity, corporate debt, venture capital funds and other money market instruments. The LIC expects to invest 8 to 10 per cent of its investible surplus in equity this year.