Market Maker Begins Innings as a Participant

The real test for the listing is how the markets perceive LIC

- Srinath Sridharan

THE LIFE INSURANCE CORPORATION OF INDIA'S (LIC's) initial public offering (IPO) is a test of its identity- a life insurance company, regulated by the Insurance Regulatory and Development Authority of India (IRDAI). The real test for the listing is how the markets perceive LIC. Is it a holding company (HoldCo) since it has a host of financial entities under it, or is it an extraordinary financial intervention tool of the government (even the risk factors in the DRHP transparently allude to this)?

Or is it rather another cash cow that the Government of India (GoI) holds and will continue to strengthen? Or does the LIC stand for a quasi-sovereign fund, as many perceive it to be.

It's another matter that most insurance regulatory senior leaders are and have been LIC alumni. So assumedly, any regulatory decision around LIC will continue to be taken with a pinch of salt by the market. As it is, the LIC alumni are in many private sector management, as well as on boards or advisory boards.

There is sufficient criticism that the government is selling its family silver to make ends meet. But what will you do if your family has hardships due to a long-lasting pandemic and yet as a populous family, you have to keep everyone fed, and healthy? That is exactly what this government has done, without actually selling the family silver!

Be it the universal free vaccination programme (the largest in the world), the fiscal stimulus to hold up or prop up the economy, or the food security initiatives, India has averted rise in extreme poverty during the pandemic. It has done so by assuring food security through its Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) programme. Add to this, the complication of the Ukraine-Russia war, the associated global worries, as well as the fiscal impact. And yet, the GoI is only selling a small portion of its stake in LIC from what it had originally estimated.