As the LIC’ IPO kicked off, the Congress charged on Tuesday that the insurer was significantly undervalued. The Opposition party claimed the Centre is likely to lose ₹30,000 crore by reduction in embedded value and paring down of the price brand. AICC general secretary Randeep Singh Surjewala said the Congress does not oppose the disinvestment policy, but the Centre should take into account key valuation indices, global uncertainties and a volatile market.
Surjewala said the LIC valuation of ₹12-14 lakh crore in February, 2022 reduced to ₹ six lakh crore in just two months. “In February, 2022 LIC IPO was assessed at 2.5 the embedded value. Now the valuation has been reduced to 1.1 times the embedded value,” he said.
Comparing the embedded value with other life insurance companies, he said the HDFC Life Insurance is trading at 3.9 times the embedded value, SBI Life at 3.2 times and ICICI Prudential Life at 2.5 times the embedded value. But for the LIC, you (the Centre) have kept the embedded value at 1.1,” Surjewala said.
‘Share value pared’
He alleged that the share price of LIC has been pared down from about ₹ 1,100 per share to sell at ₹ 902 to ₹ 949. “Government itself has reduced the price band by about ₹150 to 200 per share of LIC. Many experts have come forward to say that by this reduction in embedded value as also paring down of the share value, government or exchequer will lose ₹ 30, 000 crore,” Surjewala said.
Surjewala said the Government told big ticket investors during roadshows that the idea was to pick up ₹ 75,000 crore by selling five per cent stake in the company. “This target has now been reduced to ₹ 21,000 crore by selling 3.5 per cent stake, so both have been reduced. The disinvestment target, the money of Government of India, that should have come back to the Government has been reduced from about ₹ 70,000 crore to ₹ 21,000 crore and the total sale has been reduced by 1.5 per cent that is to 3.5 per cent from 5 per cent,” he said.
‘Why the exception?’
Surjewala said the total assets of LIC is ₹ 39.6-lakh crore as of September, 2021 and a stock portfolio of ₹52,000 crore. “The reason for change of heart after road shows abroad to revise the valuation drastically as also reduce the per cent of stake sale remains unexplained,” he added. He asked why the Centre is trying to sell LIC when domestic and global financial markets are in a turmoil on account of Russia-Ukraine War and a host of factors leading to economic downturn. “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?,” he asked.