Why 'undervalue' LIC, 'rush' IPO in a volatile market, Congress asks

A day before the launch of the initial public offering (IPO) of Life Insurance Corporation (LIC), the Congress accused the government of undervaluing the state-run insurance corporation and of rushing with the IPO despite the volatile domestic and international financial market conditions on account of Russia-Ukraine war and a host of factors leading to economic downturn.

Maintaining that it was not against disinvestment per se, the opposition party asked whether the Centre in its evaluation of LIC ignored the corporation's key indices such as high return of equity, compound annual growth rate, net premium earned and market share in India.

"Why was the LIC valuation of '12-14 lakh crore in February 2022 reduced to '6 lakh crore in just two months? LIC shares are significantly undervalued. While filing the prospectus in February 2022 for this mega IPO, LIC disinvestment was aimed at 2.5 times the embedded value (EV), but now the valuation of the IPO is towards 1.1 times its embedded value," Congress spokesperson Randeep Surjewala asked at the party's official briefing on Tuesday.


In comparison, he said, HDFC Life Insurance is trading at 3.9 times EV and SBI Life and ICICI Prudential Life trade at 3.2 times and 2.5 times their embedded values respectively. "Why has the confidence and trust of 30 crore LIC policy holders been valued at a throwaway price?"

He contended that since January-February, the share price band of LIC has been pared down by the Modi government from '1,100 per share to the current price band of '902-949 per share. "Some experts feel that the government will lose '30,000 crore by reduction in embedded value and paring down the price band," he said.

Surjewala asked why did the Modi government suddenly reduce the valuation of LIC and issue size after holding mega roadshows in India and abroad for big-ticket investors with a target to get Rs 70,000 crore by sale of 5 per cent stake. "This target has now been reduced to 21,000 crore by sale of 3.5% stake. The reason for a change of heart after roadshows abroad to revise the valuation drastically and also reduce the stake sale by 5% to 3.5% remains unexplained," he said.