Wednesday, 4 March 2020

Why LIC's IPO must be put on hold!

Source : https://economictimes.indiatimes.com/markets/stocks/news/lics-mega-ipo-is-highly-unlikely-in-fy21-heres-why/articleshow/74101252.cms


LIC’s mega IPO is highly unlikely in FY21; here’s why

The chances of LIC IPO hitting the market in financial year 2021 is very low, given a slew of challenges.

ETMarkets.com|
Last Updated: Feb 12, 2020, 08.42 PM IST

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Mumbai: The chances of Life Insurance Corporation of India’s (LIC) initial public offer (IPO) hitting the market in financial year 2021 is very low, given a slew of challenges, including valuation-related and legal challenges, says Macquarie Capital Securities.
“Even the IPO of SBI Life, which is a far simpler organisation, took 9-12 months to prepare the embedded value (EV)/valuation report and get approvals, etc. Therefore, we believe the chances of an IPO in FY21 are very low,” Macquarie analysts noted.

They pointed out that apart from legal challenges of amending the LIC Act and converting LIC to a company under the Companies Act, the biggest problem is that in the case of LIC, the entire surplus is in the form ..

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The valuation and capitalisation related challenges are not simple either.

Theoretically, the EV could only be the present value of 5 per cent of the surplus attributable to the shareholders, and that number is very low at Rs 20,000 crore to Rs 25,000 crore, they said.

“Now this doesn’t include the MTM (marked to market) on the massive real-estate properties that LIC owns and huge unrealised gains on the G-sec and e ..

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In light of the above-mentioned facts, we request LIC of India to firstly pay the wage revision arrears with interest accrued thereon till date of actual payment, difference accrued in Statutory Retirement Benefits like Provident Fund and Gratuity (due to wage revision), with interest accrued thereon till date of actual payment; to the resigning ex-employees since 1st August, 1997.

Only then, will the Balance Sheet depict the actual and correct state of affairs of the Corporation. Kindly note that I had already pointed out the fact that LIC has not made any provisions for this huge liability of unpaid arrears, amounting to several crores of rupees, in my RTI appeal in February, 2012. Besides, the Supreme Court has declared the said Clause 3 1 B (vide which arrears were being illegally repudiated by LIC) to be ultra vires, hence LIC is legally obliged to pay the arrears.

For LIC to offer an IPO, its Books of Accounts must be crystal clear.

LIC didn't provide me with any statistics pertaining to the actual number of resigning employees, all over India, whose arrears had been repudiated; as well as amounts due to them. Had it made provisions, it would have been able to provide me with the said statistics.

LIC just provided me with an incomplete list of resigning employees from the Western Zone, probably only pertaining to the wage revision charter 2010. My name wasn't there on the list, so LIC had obviously, prepared the list hastily. That list contained names of 45 such ex-employees, so we can imagine how many resigning ex-employees have been defrauded of their legitimate dues since 1997.

Now LIC must come clean and do the needful or its credibility will be at stake. 

We also request the Government to put LIC of India's IPO on hold till LIC pays up all its resigning ex-employees, their legally rightful dues.

By the way, I complete 10 years of my crusade against LIC's injustice, this year.

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