INSUBCONTINENT EXCLUSIVE:
Potential investors in LIC's giant IPO fret over government control of the insurerMUMBAI: Prospective investors in Life Insurance Corp of
India's (LIC) $8 billion Initial Public Offering are seeking assurances from company management that it will not sacrifice their interests
to meet the goals set out by the government, its controlling shareholder, sources said.In virtual roadshows for India's biggest ever
public listing, LIC management and the IPO bankers have been peppered with questions about the insurer's past investments and their
quality, four people with knowledge of the matter said.LIC has in recent years been a key buyer of shares in state-owned firms sold off by
New Delhi, often bailing out less-than-successful public issues of shares
It has also been tapped to rescue struggling financial institutions.Potential conflicts of interest issues are taking centre-stage in the
IPO roadshows that began last week and are expected to go on till the end of the month, the sources said."The government tends to act as a
regulator, manager and shareholder and it tends to get its position confused at different points of time," said Mr Shriram Subramanian,
founder of proxy advisory firm InGovern, who has not attended the roadshows."The government ministries may tend to think that LIC is 100 per
cent under their control and would like to exert that kind of an influence whenever required and that is a concern for investors,"
Subramanian added.How effectively LIC and its investment bankers are able to address the investor concerns will help in determining the
insurer's valuation in the float, and consequently the state of finances of the Indian government which is banking on proceeds from the
IPO to plug an annual fiscal deficit hole.The Finance Ministry did not respond to emails seeking comment while LIC declined
The sources declined to be identified as the discussions are private.In its draft prospectus, the insurer cited involvement of the
government, which owns 100 per cent of LIC now and is expected to own about 95% after the IPO, as a risk factor and said that minority
shareholders could be disadvantaged by government action.LIC chairman M R Kumar told a news conference on Monday that potential investors
should not worry about government control post the IPO as decisions are taken by its board and not by the government.Parallels To Coal
India?LIC, which was formed six decades ago when India's insurance sector was nationalised, straddles the business in the country, with
more than 280 million policies and over 60 per cent of the insurance segment.It is also a big investor, owning as of March last year 23.5
trillion rupees ($315 billion) worth of government securities, higher than even the central bank, out of the total central and state
government securities worth 115.2 trillion rupees, according to the prospectus.In 2019, it took over troubled IDBI Bank as the government
struggled to find a viable buyer for the lender whose shares had tanked and nearly a third of its book had gone bad.LIC said in its draft
papers that it may have to infuse more capital into IDBI Bank even though it has been pursuing a buyer for its more than 50 per cent stake
in the lender.Some market analysts and fund managers are drawing parallels of LIC with Coal India, which made its market debut in 2010 and,
despite being a monopoly, has lost over half its equity value.In its last earnings call, Coal India chairman and managing director Pramod
Agrawal said one of the reasons for its current low market valuation could be because sometimes government takes steps that are not
appreciated by shareholders."If LIC makes decisions that are not beneficial for the shareholders then they will raise concerns," said Mr
Ashvin Parekh, an independent financial services consultant."We have seen that happen earlier when Children Investment Fund exited from
state-owned Coal India after listing as it had concerns over what the majority shareholder was doing and LIC could also face similar
pushbacks from its shareholders."
