Salvaging government's disinvestment programme has cost state-owned LIC dearly as it has incurred notional loss of over Rs 3,000 crore on purchases of PSU equity through the OFS route since March 2012.
The shares of the nine PSUs — Oil & Natural Gas Corp (ONGC), Hindustan Copper Ltd, NMDC Ltd, NTPC, Rashtriya Chemicals and Fertilizers (RCF), Nalco, SAIL, MMTC and National Fertilizers — in which LIC had purchased stake are trading below their issue prices.
While Life Insurance Corporation (LIC) has purchased shares worth Rs 16,372 crore in the disinvestment programme through the offer for sale (OFS), at the current market price the investment is valued at Rs 13,230 crore.
This leads to a mark-to-market (MTM) or notional loss in investment to the tune of Rs 3,142 crore for the insurance behemoth.
In case of ONGC, LIC purchased 40.03 crore shares for Rs 12,179 crore. At the current market price, the shares are valued at Rs 9,979 crore. In case of HCL, it bought over five crore shares for R588 crore. These are now valued at about Rs 289 crore.
Similarly in case of NTPC, LIC bought 12 crore shares for Rs 1,764 crore. These shares are now valued at Rs 1,569 crore.
In order to speed up the disinvestment, the government has started the OFS or auction route for selling its stake in public sector companies.
For the current fiscal, the government proposes to raise Rs 40,000 crore through PSU disinvestment. So far this fiscal, it has raised only Rs 1,325 crore.
In the last fiscal (2012-13), the government has raised Rs 23,920 crore through disinvestment.