New Delhi: Questioning the pricing of shares of LIC IPO, Congress on Tuesday alleged that the government led by Prime Minister Narendra Modi has reduced the LIC valuation from Rs 12-14 lakh crore in February to Rs 6 lakh crore in just two months and shares of the LIC IPO are being offered at throwaway prices at the cost of the trust of 30 crore policyholders.
Hitting out at the government, Congress general secretary and chief spokesperson Randeep Surjewala said that the government had in February this year targeted to get Rs 70,000 crore by selling a five per cent stake in the public sector undertaking, but it has now been reduced to Rs 21,000 crore and 3.5 per cent 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 the economic downturn," Surjewala asked.
"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 further 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, adding that since January-February 2022, the share price band of LIC has been paired down by the Modi government from Rs 1,100 per share to the current price band of Rs 902 – Rs 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 per cent to 3.5 per cent "which remains unexplained".
The reason for the government undermining these key determinants is unknown to every market watcher or financial expert, he said, adding 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.