LIC “Significantly Undervalued”: Congress Questions Pared Down Listing

New Delhi: 

The Congress on Tuesday raised questions about the closely watched stock market listing of Life Insurance Corporation (LIC), by the government, saying that shares of India’s biggest insurer had been “significantly undervalued”.

“Why was the LIC valuation of ₹ 12-14 lakh crore in February 2022 reduced to ₹ 6 lakh crore in just two months? While filing the prospectus in February 2022 for this mega IPO (Initial Public Offering), 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. Comparably, 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 value respectively,” the Congress said in a statement.

“Why did Modi government suddenly reduce the ‘Valuation of LIC’ and ‘Issue Size’ after roadshows in India and abroad? Is the Modi government ignoring LIC’s key indices? And why is the government trying to sell LIC when Domestic and Global Financial Markets are in turmoil on account of the Russia-Ukraine War and a host of factors leading to the economic downturn?” it asked.

The LIC IPO got off to a strong start, with 59.3 million shares that were set aside for anchor investors being subscribed at ₹ 949 apiece, according to an exchange filing on Tuesday.

The Indian government has said it expects to raise up to ₹ 21,000 crore, just a third of its original target, from selling a 3.5 per cent stake in LIC in the country’s biggest IPO.

Anchor investors are high-profile institutional investors that are allotted shares before the subscription opens for retail and other investors, and have to commit to holding their shares for a certain period after listing.

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LIC’s offering is set to open for other investors on May 4 and will close on May 9. The indicative price range has been set at ₹ 902 to 949 per share, with ₹ 5,600 crore of shares set aside for anchor investors.

Norwegian wealth fund Norges Bank Investment Management and the Government of Singapore are among the subscribers to the anchor book, the filing showed.

Alongside other global funds, domestic mutual fund houses such as HDFC mutual fund, SBI, ICICI and Kotak have also come in as anchor investors.

Over 20 investors had expressed interest in subscribing to the anchor book, according to two banking sources.

Foreign institutional investors had some concerns about LIC’s IPO, but global pension funds had shown “good interest,” LIC’s chairman said last week.

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