LIC IPO: Congress Corners Modi Govt, Says Shares ‘Undervalued’
The Congress alleged the shares are undervalued and being offered at throwaway prices at the cost of the trust of 30 crore policyholders, PTI reported.
New Delhi: With the Life Insurance Company (LIC) initial public offering (IPO) all set to hit the primary markets on Wednesday, the Congress on Tuesday cornered Prime Minister Narendra Modi-led government and questioned the shares pricing.
The Congress alleged the shares are undervalued and being offered at throwaway prices at the cost of the trust of 30 crore policyholders, PTI reported.
Congress general secretary and chief spokesperson Randeep Surjewala asked why the Centre reduced LIC valuation from Rs 12-14 lakh crore in February to Rs 6 lakh crore in just two months.
Surjewala said the ruling dispensation had earlier 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, according to the news agency.
Stating the Secretary in-charge of public sector divestment has said the “government will not sell its stake in PSUs if market conditions are not favourable”, Surjewala said: “Why is LIC's IPO an exception to this policy? India seeks answers.”
The Congress leader said that the LIC disinvestment was aimed at 2.5 times the embedded value (EV) while filing the prospectus in February 2022 for this mega IPO, but now the valuation of the IPO is about 1.1 times the embedded value.
Surjewala said comparably, HDFC Life Insurance is trading at 3.9 times embedded value and SBI Life and ICICI Prudential Life trade at 3.2 times and 2.5 times their embedded value respectively.
He also claimed that the share price band of LIC has been paired down by the government from Rs 1100 per share to the current price band of Rs 902 - 949 per share since January-February 2022, adding some experts feel the state exchequer will lose Rs 30,000 crore by this reduction in embedded value and the pairing down the price band.
Claiming that the government earlier in February 2022 conducted formal roadshows for big ticket investors, Pension Funds, Mutual Funds, Investment Corporations with a target to get Rs 70,000 crore by selling of five percent stake, Surjewala asked: “Why did the Modi Government suddenly reduce the valuation of LIC and the issue size after roadshows in India and abroad?”
The Congress leader sought answers from the Centre for the reason for a change of heart after roadshows abroad to revise the valuation and also reduce the stake sale from five per cent to 3.5 percent.
Surjewala said the reason for the government undermining these key determinants is “unknown to every market watcher or financial expert”.
He claimed that the LIC has 30 crore policyholders, adding its total assets are to the tune of Rs 39,60,000 crores as of September 2021 and a stock portfolio of Rs 52,000 crore.
The Congress leader 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.
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