IPO a first step towards destruction of public character of LIC: Opposition

Scaling down of valuation of share was done under pressure from international investors out to make a quick buck, says CPI(M)

Opposition parties criticised the Central Government for offloading its stake in Life Insurance Corporation of India (LIC) in the form of Initial Public Offering (IPO) that opens on May 4. They called it a first step towards destruction of the public character of LIC that holds two-third of the insurance market.

In a statement, Communist Party of India (Marxist) [CPI(M)] Polit Bureau expressed concern at the scaling down of the valuation of the LIC share which, it alleged, was done under pressure from the international investors out to make a quick buck.

“The latest estimate of Embedded Value (EV) of LIC was pegged at ₹5.40 lakh crore. About two months ago, it was expected that the real worth of each LIC share would be arrived at by applying a multiplication factor of between 2.5 and 3. However, cajoled by international investors, the government is now trying to scale down the valuation dramatically by using a multiplication of just 1.1 times LIC’s estimated EV,” the party said. This smacked of gross impropriety and financial wrongdoing, it stated.

Congress leader Jairam Ramesh tweeted, “Very intriguing that while filing the prospectus in February for its mega IPO, LIC disinvestment was at 2.5 times the embedded value, but now the valuation of the IPO to open soon is just 1.1 times. Why is the Modi govt so desperate to sell and sell cheap?”

The CPI(M) said the Government of India had only invested ₹5 crore in it and now the total life fund stood at ₹34 lakh crores. With the IPO, the party said, the government was also selling the future income flows to the policy holders.

Communist Party of India (CPI) general secretary D. Raja called the IPO a desperate measure by a government that had failed to generate revenue since it was not willing to take on the rich. “The sell-offs are bound to affect the sovereignty and economic independence of our sovereign nation which in contrast will benefit the corporates, both domestic and foreign,” he stated.