The Politburo of the Communist Party of India (Marxists) has issued the following statement:
STOP LIC IPO IMMEDIATELY
The Politburo of the CPI(M) strongly opposes the way the central government proceeded in initiating the LIC IPO. This is a move to destroy the LIC’s public character and hand over priceless financial assets, most of which are owned by the nearly 29 million LIC policyholders.
The LIC has a unique place in the insurance world. It was created by nationalizing private insurance companies to help build the state. A hybrid save-risk cover product was developed and proved popular with ordinary people; this led to rapid business expansion. Where the Indian government invested only Rs 5 crore, the total life fund is now Rs 34 crore.
Now the government wants to change the character of the financial institution from a trust of policyholders to a profit-maximizing company owned by shareholders. The sale of LIC shares is actually the sale of future income streams to policyholders. They were not consulted or informed about the implications of the IPO.
The details of this disgusting process are now becoming known. LIC’s latest embedded value (EV) estimate has been set at Rs 5.40 lakh crore. About two months ago, it was expected that the real value of each LIC share would be determined by applying a multiplication factor between 2.5 and 3. However, the government, persuaded by international investors, is now trying to cut the valuation drastically by a multiplication of just 1.1 times LIC’s estimated EV.
Despite a quarter-century of deregulation in the insurance sector, LIC still accounts for 73 percent of policies and 61 percent of first-year premiums in the country. It is one of the world’s most valued insurance brands. Its assets are Rs. 38,000 and it has more than 1,000 employees and 14,000 agents spread across the country. A company that pioneered life insurance in India, which has a market share of nearly two-thirds and an impeccable track record spanning six decades, may be “judged” by capricious international investors for a quick buck at the cost of millions policyholders. This smacks of gross impropriety and financial misconduct.
While opposed in principle to an IPO for an institution whose assets are largely owned by millions of policyholders, the Politburo is particularly outraged at the arbitrary manner in which the real value of LIC will be underestimated and the interests of policyholders undermined aggressively pursued by the government. The PB therefore urges the broadest possible opposition to the IPO and expresses its solidarity with the ongoing struggle of LIC employees and policyholders and calls on the government to stop this process immediately.
Comments are closed.