Share rating downgrade comes amid pressure from international investors to make a quick buck, says CPI(M)
Share rating downgrade comes amid pressure from international investors to make a quick buck, says CPI(M)
Opposition parties have criticized the central government for divesting its stake in Life Insurance Corporation of India (LIC) in the form of an initial public offering (IPO) that opens on May 4. They called this a first step in destroying the public character of LIC, which holds two-thirds of the insurance market.
In a statement by the Indian Communist Party (Marxist) [CPI(M)] The Politburo expressed concern about the downgrade in LIC’s stock rating, which it said came amid pressure from international investors to make a quick buck.
“LIC’s latest embedded value (EV) estimate has been set at 5.40 lakhcrore. About two months ago, it was expected that the real value of each LIC share would be determined by applying a multiplication factor between 2.5 and 3. However, the government, persuaded by international investors, is now trying to cut the valuation drastically using a multiplication of just 1.1 times LIC’s estimated EV,” the party said. This smacks of gross inappropriateness and financial misconduct, it said.
Congress Chair Jairam Ramesh tweeted: “Very fascinating that when the prospectus for the mega IPO was filed in February, the LIC divestment was at 2.5x the embedded value, but now the valuation of the soon to start IPO is only 1, 1x. Why is the Modi government so desperate to sell cheap?”
The CPI(M) said the Indian government had invested just £5million in them and now the total life fund stands at £34billion. With the IPO, the party said, the government is also selling future streams of income to policyholders.
“A Desperate Measure”
Communist Party of India (CPI) Secretary-General D. Raja called the IPO a desperate move by a government that was unable to generate revenue because it was unwilling to take on the rich. “The sell-offs will inevitably affect the sovereignty and economic independence of our sovereign nation, which in turn will benefit businesses at home and abroad,” he said.
