Unsurprisingly, the maiden public issue of the public sector Life Insurance Corporation of India (estb.1956), which is likely to be launched within the next few months, is generating heated excitement in the stock market and within India’s fast expanding investors’ community. The cash-strapped Union government, the sole owner of the corporation, is set to offer 316 million equity shares equivalent to 5 percent of its total shareholding in the corporation to raise Rs.66,000 crore in the largest public issue in Indian history.
Certainly the corporation has come a long way since 1956 in the prime of Nehruvian socialism when more than 200 private life insurance companies doing business in India were nationalised and amalgamated into LIC. But within a year, LIC was embroiled in the Mundhra scandal which led to the resignation of Union finance minister T.T. Krishnamachari. Subsequently, it rapidly morphed into a typical public sector enterprise swarming with clerks. In 1979 your diarist, then editor of Business India, wrote the first ever detailed cover feature on this corporation, which had acquired a notorious reputation for rejecting insurance payout claims on flimsiest pretexts. To the extent that a Supreme Court judge described it as “a corporation without a heart”.
Nevertheless, the forthcoming LIC public issue is likely to be heavily over-subscribed. According to stock market mavens, after the government calibrates the premium payable on its shares, the corporation’s market cap is likely to balloon to Rs.22 lakh crore transforming LIC into the country’s most valuable company, ahead of Reliance Industries (Rs.16 lakh crore). Yet with the Union government divesting a mere 5 percent of its equity shareholding, LIC will overwhelmingly remain a slothful public sector enterprise. In the past 60 years during which it was an elephantine monopoly, it managed to provide insurance cover to a mere 3 percent of the adult population. In the US, 54 percent of the population is covered by life insurance. At best, LIC is a failed success.
