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“Government lost Rs 50K cr due to undervaluation of LIC shares; greatest scandal in the annals of privatization in India’

The Indian government will suffer a loss of Rs. leading economists, social scientists and activists.

After analysis, the People’s Public Sector and Utilities Commission said that due to pressure from “investors”, the Modi government had undervalued the price of LIC’s shares.

Calling the whole process “scandalous”, the People’s Commission, of which former professor Prabhat Patnaik is a leading member, on May 2 urged Finance Minister Nirmala Sitharaman to halt the process. But the government paid no attention to it.

Questioning the methods adopted by the government to decide the value of shares, the People’s Commission said: “This is nothing short of a scandal, perhaps the biggest in the annals of privatization in India. “.

Alleging that the IPO had been proposed “under pressure” to pave the way for the privatization of India’s blue chip PSU, the Commission said: “The Ministry of Finance succumbed to pressure from global investors and offered the shares at a steep discount”.

“As retail investors, employees and policyholders are offered shares at a discount, retail investors and employees have to pay Rs. 904 per share and policyholders Rs. 889 per share – this implies a huge loss for the public treasury,” read a statement issued by the People’s Commission.

He alleged that the government failed to use the “multiplication factor” which is standard practice in deciding the value of shares.

“Applying a multiplication factor equal to 3.96 (HDFC Life) to the LIC case shows that the base price of each LIC share in the IPO should be at least Rs. 3,379. At this price, the total proceeds from the sale of 22.1375 crores of shares would have been Rs. 74,803 crores. The resulting loss to the Treasury is a whopping Rs. 53,795 crores,” the Commission added. popular.

Asking why the government has not resisted pressure from capricious investors whose interests conflict with those of millions of policyholders who will be the ultimate losers, the People’s Commission asked: “How is it possible that the valuation of India’s largest insurance company, sui generis in the world of finance, to vary so much in the space of a few months?

Talk to national herald, C Venkatachalam, General Secretary, All India Bank Employee Association (AIEBA) said: “Government has sold shares of LIC up to 3.5% now. This may seem very small, but what is important to note is that this is the start of the sale of shares of this national flagship institution. It’s just a matter of selling family silverware and long-term assets to deal with current short-term financial constraints. The government has no scruples of conscience. They are ready to sell anything.

As of May 9 – the final day of the auction – the state-owned insurance giant underwrote 2.95 times, with bids receiving bids for 29.07 crore shares against an IPO size in stock market of 16.2 crore shares.

According to reports, the Modi government intends to raise Rs 21,000 crore by selling 3.5% stake entirely through an offer of sale (OFS) of which 10% of the shares were reserved for LIC policyholders and 0 .7% to LIC employees. In addition, 31.25% was reserved for (retail) investor households.

Established on September 1, 1956 by the Life Insurance of India Act which nationalized the insurance industry in India, LIC was created after the merger of 245 insurance companies and provident societies.

Considered one of the strongest financial institutions India has ever had, the LIC secured only Rs 5 crore as government equity investment between 1956 and 2011.

Highlighting the contribution of the peoples in building the LIC, the People’s Commission said, “To reiterate, between 1956 and 2011, government investment in equity was paltry Rs. 5 crores, implying that it was the policyholders’ hard-earned savings that helped LIC blossom into a mature insurance company.


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