Congress questions undervaluation and timing of LIC IPO

On the eve of the mega initial public offering (IPO) of the Life Insurance Corporation (LIC), the Congress on Tuesday questioned why the shares of the company were being “undervalued” and offered at throwaway prices.

Addressing a press conference, Congress general secretary and chief spokesperson Randeep Surjewala questioned the government for reducing the LIC valuation from ₹12 lakh crore-₹14 lakh crore in February to ₹6 lakh crore in just two months.

He said the government had set a target to raise ₹70,000 crore by selling 5% stake in the public sector undertaking (PSU), but had now reduced it to ₹21,000 crore and 3.5 percent stake sale. This move had eroded the trust of 30 crore policyholders, Mr. Surjewala added.

The Congress leader claimed that the LIC had 30 crore policyholders and its total assets were to the tune of ₹39,60,000 crore (USD 526 billion) as of September 2021 and a stock portfolio of ₹52,000 crore. Further, the company’s income from its investments was to the tune of ₹3.35 lakh crore in the April-September 2021 period. It directly employed 13.94 lakh families (12.80 Lakh agents plus 1.14 lakh employees) through its 3,542 offices across the country, Mr. Surjewala said.

“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 said.

“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,” the Congress leader added.

He also noted that while filing the prospectus in February 2022 for the IPO, the LIC disinvestment was aimed at 2.5 times the embedded value (EV), but now the valuation of the IPO was about 1.1 times the embedded value. In comparison, HDFC Life Insurance was trading at 3.9 times the EV; while SBI Life and ICICI Prudential Life were trading at 3.2 times and 2.5 times their EVs respectively.

He claimed that since January-February 2022, the share price band of LIC had been pared down by the Modi government from ₹1,100 per share to the current price band of ₹902-₹949 per share and some experts felt that the state exchequer would lose ₹30,000 crore in this process.

Noting that the government conducted formal roadshows for big ticket investors, Pension Funds, Mutual Funds, Investment Corporations with a target to get ₹70,000 crore by selling of 5% stake in February, he asked the reason for a “change of heart” after roadshows abroad to revise the valuation and also reduce the stake sale from 5% to 3.5% .

“Why did the Modi Government suddenly reduce the valuation of LIC and the issue size after roadshows in India and abroad,” he asked.