Ahead of the mega LIC IPO, Congress Tuesday questioned the pricing of shares, alleging they are undervalued and being offered at throwaway prices at the cost of the trust of 30 crore policyholders.
Congress general secretary and chief spokesperson Randeep Surjewala asked why did the government reduce LIC valuation from Rs 12-14 lakh crore in February to Rs 6 lakh crore in just two months.
He said the government had in February this year targeted to get Rs 70,000 crore by selling five percent stake in the public sector undertaking, but it has now been reduced to Rs 21,000 crore and 3.5 percent stake sale.
”Why is the government trying to sell LIC when domestic and global financial markets are in turmoil on account of the Russia-Ukraine war and a host of factors leading to economic downturn,” he asked.
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”The Secretary in charge of public sector divestment has said that the government will not sell its stake in PSUs if market conditions are not favourable. Why is LIC’s IPO an exception to this policy? India seeks answers,” he said.
Surjewala said that while filing the prospectus in February 2022 for this mega IPO, the LIC disinvestment was aimed at 2.5 times the embedded value (EV), but now the valuation of the IPO is about 1.1 times the embedded value.
Comparably, HDFC Life Insurance is trading at 3.9 times EV, and SBI Life & ICICI Prudential Life trade at 3.2 times and 2.5 times their embedded value respectively, he said.
He also claimed that since January-February 2022, the share price band of LIC has been paired down by the Modi government from Rs 1100 per share to the current price band of Rs 902 – 949 per share and some experts feel that the state exchequer will lose Rs 30,000 crore by this reduction in embedded value and the pairing down the price band.
”Why did the Modi Government suddenly reduce the valuation of LIC and the issue size after roadshows in India and abroad,” he asked, claiming that in February 2022, the government conducted formal roadshows for big-ticket investors, Pension Funds, Mutual Funds, Investment Corporations with a target to get Rs 70,000 crore by selling off five percent stake.
He sought answers from the government for the reason for a “change of heart” after roadshows abroad to revise the valuation and also reduce the stake sale from five percent to 3.5% ”which remains unexplained”.
The reason for the government undermining these key determinants is unknown to every market watcher or financial expert, he said. The Congress leader claimed that the LIC has 30 crore policyholders and its total assets are to the tune of Rs 39,60,000 crores (USD 526 Billion) as of September 2021 and a stock portfolio of Rs 52,000 crore.
The company has income from its investments to the tune Rs 3.35 lakh crore in the April-September 2021 period and directly employs 13.94 lakh families (12.80 Lakh agents plus 1.14 lakh employees) through its 3,542 offices across the country.
He said the company issues three crore policies per year, which amounts to about one lakh policies per day and is declared as the world’s 10th largest insurance brand.