LIC Being Sold To Private Investors? 1.2 Lakh LIC Employees Will Strike To Oppose LIC IPO

Ahead of the LIC IPO the All India Insurance Employees Association went on a nationwide strike on Sunday.

Fears Of Privatisation

The AIIEA has also announced a two-day strike on March 28-29.

It said that the IPO, set to be the nation’s largest-ever, is the first step towards privatising LIC which will “compromise with the interests of the policyholders”.

The LIC Employee’s Union is supporting the strike and announced that 1.25 lakh insurance workers will join the protest on the day of the IPO launch.

Workers will boycott the workday of the IPO launch and 10 central trade unions will also join them in protests against the new labour codes and the privatisation spree of the government.

IPO Process Moving Along

The LIC filed a draft red herring prospectus with the Securities and Exchange Board of India (SEBI) on Sunday.

It will offer 31.6 crore equity shares at a face value of Rs 10 each.

These will be sold in the IPO to raise Rs 60,000 crore to Rs 75,000 crore.

10% shares will be reserved for policyholders of LIC who will also get a discount on the IPO issue price.

SEBI is expected to give its approval for the IPO in the next three weeks.

Shift In Focus Towards The Elite?

Vice-president of AIIEA AK Bhatnagar said that LIC will start to behave like other private firms after its IPO.

He claims that it will shift its focus toward the elite section of society and charge high premiums rather than focusing on increasing the number of policies in the nation.

“Consequently, the poor and social insurance will suffer. The average premium size of LIC is Rs 11,000 as against Rs 50,000 in the private sector, which targets the creamy layer”, he said.

History

LIC presently employs one lakh employees and 13 lakh agents across the nation.

It was created by the Jawaharlal Nehru government in 1956 after nationalising the life insurance business and taking over 245 foreign and domestic companies.

The government then aimed to provide security to policyholders and convert their small savings into capital for long-term investment.

Its estimated embedded value is around Rs 5.4 lakh crore.

Crucial To Meet Target

In terms of insurance premiums, LIC is the third-largest company in the world.

Its IPO is crucial for the government to meet its 2021/22 fiscal deficit target of raising around 600 billion Indian rupees ($8.03 billion).

It had significantly cut short its divestment and privatisation plans for the fiscal year ending March 31 to 780 billion rupees from 1.75 trillion.

Till date it has raised approximately Rs 12,000 crore through privatisation of Air India and stake sale in other public sector units.