Spokesperson: Shri Randeep Singh Surjewala: He said- Why confidence and trust of 30 crore LIC policy holders is being under valued at much less than the market value of Life Insurance Corporation? We all know that LIC was founded on September 01, 1956, by Pt. Jawaharlal Nehru, by Sardar Vallabhbhai Patel, by the then Congress Government and has been built brick-by-brick as India’s biggest company. It is an insurance giant and a crown jewel.

Modi Government is reading to launch an LIC IPO. This is the biggest IPO in the history of Indian Stock Market. We also know, but the Intent, Purpose, and Modus Operandi of government’s desperation to list LIC IPO, despite lower valuations, omission to take into account key valuation indices, global uncertainties and a volatile market is deeply intriguing and highly questionable, that’s our only objection.

Let’s know some facts about LIC. LIC’s total assets are 39,60,000 crores as of Sep, 2021, or US$ 526 billion and LIC’s stock portfolio is 50 thousand crores, because these facts are important to know, for what I am saying.

Secondly, LIC has 30 crore policy holders. LIC’s income from investments between April and September, 2021, is 3,35,000 crores. LIC employs 13,94,000 households in the country, of which 12,80,000 are LIC agents and 1,14,000 are employees. LIC has a total of 3,542 offices in the country. LIC is the 10th largest insurance brand in the world. This is what LIC is.

Modi Government must answer four questions- 1. Why was the LIC valuation of Rs. 12-14 lakh crore in February, 2022, reduced to Rs. 6 lakh crores in just two months? In February, 2022, LIC IPO was assessed at 2.5 the embedded value. What is embedded value- embedded value is the net worth of the company. Now the EIC valuation has been reduced to 1.1 times the embedded value. 2. Why did Modi Government suddenly reduce the valuation of the LIC and as the issue size after road shows in India and abroad? In February, 2020, Modi government conducted formal road shows for big ticket investors, for pension funds, for mutual fund, for investment corporations, for other such entities and I will name some, for example like they did so because for like Capital Group, like Aberdeen Asset Management, for California University, for Abu Dhabi Investment Authority, for Government of Singapore Investment Corporation, for Canadian Pension Funds, for HSBC Mutual Fund, for Franklin Temple Fund. Idea was to pick up Rs. 75,000 crores by selling a 5 per cent stake in the company, that is important, please note. They said- we will sell 5 per cent stake, we are doing these international and national road shows. We will pick up 70,000 crores of disinvestment target by selling 5 per cent. This target has now been reduced to 21,000 crores by selling 3.5 per cent stake, so both have been reduced. The disinvestment target, the money of government of India, that should have come back to government of India has been reduced from about 70,000 crores to 21,000 crores and the total sale has been reduced by 1.5 per cent that is 5 per cent to 3.5 per cent. 3. Is Modi government ignoring LIC’s key indices. High ROE, (Return on Equity) among its global peers, other similar placed companies, nationally, internationally. Two, compound annual growth rate of the company and three, net premium earned by the company and four, its market share in India. These are the four denominators when you start to value a company, broadly. Let’s have a look at these facets. In the financial 2021, LIC’s ROE (Return on Investment of Share Holders) to put it very simply was 82 per cent, which is the highest in the world. This is four times of its nearest competitor in the world which is a Chinese company called Ping An Insurance. Ping An Insurance, ROE was only 19.5 per cent, compare to 82 per cent to LIC. Second facet- LIC’s compound annual growth rate and I tried to look at it between financial year 2016 to financial 2020 is 5.1 per cent. So LIC’s compound annual growth rate over these four years is 5.1 per cent. This makes life insurance corporation number three company in the world in the insurance sector with this kind of growth, compound annual growth rate. Thirdly, in financial year 2021, LIC was number 5 in the world, I am not even talking about India. It was number 5 in the world. In the net premium earned with a premium of US dollar 56 billion. Next facet- in the financial year, 2021, LIC’s market share in the Indian market after all that’s how you value a company, was 64 per cent of total. So LIC alone was 64 per cent of the entire Indian Market for Insurance. That’s the kind of dominant position it has. The next insurance player is SBI life. Its market share was only 8 per cent. So, 64 per cent, 8 per cent, that’s a stark difference. This degree of market share makes LIC the number one company with a country insurance market share in the world. And last facet- LIC is also 6th largest in the world when it comes to assets under management. How many assets are under management of the company? It is number 6 in the world. The total value of these assets as I said is US dollar 526 billion or Rs. 39,60,000 crores. The reason for government undermining these key indices in arriving at the valuation is unknown again. 4. Why is government trying to sell LIC, when domestic and global financial markets are in a turmoil on account of Russia-Ukraine war, on account of a high economic volatility. The secretary in charge of Public Sector Disinvestment recently said that government is putting temporarily on hold disinvestments in all PSUs on account of market volatility, then why is LIC an exception to that rule? Is it not again part of the disinvestment process? Tuesday, May 3, 2022