FE Editorial : Public public partnership
The Financial Express: Dec 05 2012, 01:50 IST
With LIC losing over R5,000 crore in mark-to-market terms in just three of its big-ticket purchases of PSUs since February 2010—R986 crore in NTPC, R2,659 crore in NMDC and R1,525 crore in ONGC—the government needs to relook its strategy of getting LIC to step in to pick up PSU shares when all else fails. LIC has bought around 40-45% of this year’s disinvestment so far, and we haven’t even traversed a 40th of the distance so far—Hindustan Copper’s divestment was for just R800 crore as compared to the R30,000 crore target—so there’s a lot more of PSU divestment that LIC may be called in to rescue. To be sure, LIC may still look like it is making profits but that’s due to its older holdings. In the case of ONGC, for instance, in September last year, LIC’s average holdings of 3.17% of ONGC’s shares were worth around R268 a share. In September 2012, its average holdings of 7.77% of ONGC weren’t much higher at R284 a share, but this hides the fact that it bought around 40 crore shares at R304 apiece in March 2012. But even after taking this into account, between September 28, 2012, and yesterday, LIC has lost R1,300 crore. LIC has even been buying quite aggressively into PSU banks which have been losing value quite rapidly given the speed at which they are accumulating NPAs. In some banks, with the government unable to shore up their capital needs, fresh equity was subscribed to by LIC. The
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