The Polit Bureau of the Communist Party of India (Marxist) has firmly opposed the manner in which the Central Government has initiated the Initial Public Offer (IPO) of the Life Insurance Corporation (LIC) saying that it is a step towards the destruction of the public character of the corporation, "handing over priceless financial assets largely owned by nearly 29 crore policyholders."
The Polit Bureau of the CPI (Marxist) in a statement said that the LIC has a unique place in the world of insurance, and 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 Government of India invested only Rs 5 crore, the total life fund today is Rs 34 lakh crore," they said.
They further alleged that 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 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 CPI(M) also alleged that the government is trying to scale down the valuation "dramatically" by using multiplication of just 1.1 times LIC's estimated Embedded Value (EV).
As per the statement, the latest estimate of the Embedded Value 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."
"The Polit Bureau while, in principle, opposing the IPO of an institution whose assets are largely owned by crores of policyholders, is particularly outraged by the arbitrary manner in which undervaluation of the real worth of LIC and undermining of the interest of the policyholders is being aggressively pursued by the Government," the CPI(M)'s statement read while urging for the widest possible opposition to the IPO.
The LIC has set its price band for the Initial Public Offer (IPO) at Rs 902 to Rs 949 per equity share. The public offer starts on May 4 and will remain open for bidders till May 9.
( With inputs from ANI )
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