The voracious appetite in the markets for IPOs, as seen by the many big ticket announcements including that of Zomato this week, also auguers well for the cash-starved government
Even as the government is setting the stage for big ticket sell-offs in the coming months, the opposition is also growing. While there is concern in the insurance and banking sector, the ruling dispensation is confident in pushing the reforms through without any extra effort.
The voracious appetite in the markets for IPOs, as seen by the many big ticket announcements including that of Zomato this week, also auguers well for the cash-starved government.
On the anvil is the IPO (initial public offering) of the Life Insurance Corporation of India (LIC). Despite it being a minority stake sale, it could well be the mother of all IPOs, with analysts expecting a windfall of Rs 1 lakh crore or above.
Additionally, one of the three general insurance companies are also expected to go on the block. Agencies report that the Cabinet Committee on Economic Affairs (CCEA) gave the nod for this last week. It is likely to be United India Insurance, if the reported recommendations of NITI Aayog is accepted.
As per this year's budget, the Union government's target is to mop up at least Rs 1.75 lakh crore through asset sales. While the government missed the target in the last couple of years, the post-COVID dire straits the country's coffers find itself in, not to mention the huge expenses on stimulus, welfare and pandemic fighting, has made the Centre even more resolute to aim for meeting the target this time around.
This was evident in the manner in which the department of public enterprises, earlier with the ministry of heavy industries, was brought under finance ministry. The reading is that this was done so that Nirmala Sitharaman could pursue her disinvestment targets unfettered by inter-departmental delay.
“The amount raised shall strengthen the government's financial position amid the fight against COVID-19,” says Amanpreet Aulakh, AVP, training and development at Sunstone Eduversity, adding how it would only help customers. “The move shall improve the accountability and transparency of the largest insurer. LIC shall come under direct SEBI scanner and shall ensure operational transparency and strengthen overall corporate governance within LIC. It is a win-win situation for customers.”
However, it is unlikely to be a smooth sailing. Bank employee unions have already voiced their protest, and it remains to be seen whether any further agitations are likely to pop up. The All India Insurance Employees Association recently called on the government to drop the plan and instead go in for a merger of insurance companies to achieve economies of scale, just like the government did with some public sector banks in recent years.
Argues C.H.Venkatachalam, general secretary of the All India Bank Employees Association and chairman of the Co-ordination Committee of Banks, Insurance and Financial Sector Unions, “Life insurance and general insurance sector deal with the savings of the common people. It is only out of the bitter experience with private insurers in those days that all those companies were nationalised and brought into the public sector. The country has seen their phenomenal contribution in the last five decades. Disinvestment or privatisation of insurance companies will be most retrograde and against people's interest.”
