[Marxistindia] Stop the LIC IPO Forthwith

[news from the cpi(m)]

April 28, 2022

Press Statement

 

The Polit Bureau of the Communist Party of India (Marxist) has issued the
following statement:

 

Stop the LIC IPO Forthwith

 

The Polit Bureau of the CPI(M) firmly opposes the manner  in which the
Central Government has gone about in initiating the LIC IPO. This is a step
towards the destruction of the public character of the LIC and handing over
priceless financial assets largely owned by nearly 29 crore policyholders of
the LIC.

 

The LIC has a unique place in the world of insurance. It was created through
the nationalisation of private insurance companies in order to contribute to
nation-building. A hybrid saving-cum-risk coverage product was innovated and
proved to be popular with ordinary people; this led to a rapid expansion of
business. Where the GOI invested only Rs 5 crore, the total life fund today
is Rs 34 lakh crore.

 

Now the government wants to change the character of the financial
institution from a trust of policy holders to a profit-maximizing company
owned by shareholders. The sale of shares of LIC is, in effect, the sale of
future income flows to policy-holders. They have not been consulted or
informed of the implications of the IPO.

 

The details of this obnoxious process are now unfolding. The latest estimate
of Embedded Value (EV) of LIC was pegged at Rs 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.

 

Despite a quarter-century of deregulation of the insurance sector, LIC still
accounts for 73 per cent of the policies and 61 per cent of the first-year
premium in the country. It is one of the world's most valued insurance
brands. Its assets total Rs 38 lakh crore and it has more than one lakh
employees and 14 lakh agents spread all over the country. A company that has
pioneered life insurance in India, which commands a market share of almost
two-thirds, and whose track record is without a blemish over six decades, is
allowed to be "valued" by capricious international investors out to make a
fast buck at the cost of millions of policyholders. This smacks of gross
impropriety and financial wrongdoing.

 

The Polit Bureau while, in principle, opposing the IPO of an institution
whose assets are largely owned by crores of policy holders, is particularly
outraged by the arbitrary manner in which undervaluation of the real worth
of LIC and undermining of the interest of the policy holders is being
aggressively pursued by the Government. The PB, therefore, urges for the
widest possible opposition to the IPO and expresses solidarity with the
ongoing struggle of the employees and the policyholders of LIC and demands
that the government halt this process forthwith.

 

 

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