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Disinvestment Policy Needs a Fresh Look

 

Life Insurance Corporation of India (LIC) has been purchasing PSU shares to support government’s disinvestment programme. The state-owned insurer has more than 1% share in 53 listed PSUs except MOIL and SJVN.
 
Whenever there is poor investor response to government’s sell-off plan, LIC is asked to bail it out.
 
But LIC has taken a hit of over Rs 20,000 crore on its PSU portfolio this year because of deep erosion in stock value of PSEs, in a development that should give a pause to the government.
 
When LIC purchases share of a PSU, money only goes from one to another pocket of the government.  Public participation in the PSU’s ownership does not increase. That raises question over the government's disinvestment policy itself.
 
Nine out of every 10 listed PSU stocks have seen a fall of up to 40% in their market value so far in 2018.
 
Data show that LIC’s shareholding some cases such as Corporation Bank, BHEL and Punjab National Bank goes up to 19%.
 
Barring Coal India, Central Bank and IDBI Bank, all PSU stock have been trading in the red this year. LIC has suffered the biggest loss this year in State Bank of India wherein it holds 10.39% stake, which translates into Rs 22,300 crore as on March 20, down 20% from Rs 27,758 crore at the end of 2017, suggesting a notional loss of Rs 5,500 crore.
 
LIC holds 13.94 equity in PNB, which has lost 43% of its market value this year. Consequently, the life insurer has lost Rs 2,500 crore of its stock value in the public sector bank.
 
LIC held 9.23% stake in ONGC as at the end December 31, which amounted to Rs 23,050 crore. Now that value has fallen by 10.4% to Rs 20,652 crore.
 
Bank of India and NTPC declined 38% and 7%, respectively. The two stocks PSU stocks have caused notional loss of over Rs 1,000 crore to the insurer.
 
LIC also suffered notional losses on other PSU stocks in its portfolio.


Posted By :  Admin
Posted Date :  05-10-2018