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