India's largest insurer - Life Insurance Corporation of India or LIC - has made headlines with its decision to sell off a significant portion of its real estate holdings nationwide.
This decision comes amidst a robust upswing in the real estate market, driven by post-pandemic economic recovery, rapid urbanization, and extensive infrastructure development projects.
According to reports, LIC plans to raise between $6 to $7 billion from the sale – that’s about Rs 5 to 6 lakh crore - starting initially with properties located in Mumbai. The insurer has also initiated an internal team to outline the sale strategy, the reports added.
The rationale behind offloading such extensive real estate assets could be multifaceted. For one, it aligns with the government's broader agenda to monetize the real estate holdings of public sector units (PSUs). By unlocking the value of these properties, LIC aims to optimize its financial resources and potentially reinvest in its core insurance operations.
Moreover, LIC's financial health has been robust, with the insurer clocking ₹40,676 crore in net profit for FY24, compared to ₹36,397 crore in FY23. This increase was driven by improved renewal premiums, better investment returns, and a slight uptick in the value of new business (VNB). Additionally, LIC announced a dividend of ₹6 per share for FY24, reflecting its strong financial performance and commitment to shareholders.
However, executing this ambitious plan is not without its challenges.
Many of LIC's properties are entangled in legal disputes, which could complicate the valuation and sale process.
Experts caution that the lack of recent sale transactions for iconic properties like the Jeevan Bharti building in Delhi, as well as others in Kolkata and Mumbai, has led to conservative estimates of their true market worth. The actual value of these assets could potentially far exceed current valuations once these legal hurdles are resolved. LIC may even consider forming a separate entity to hold the real estate assets and manage their monetization, said experts, pointing to the challenge in valuing these assets.
The reports come at a time when LIC is struggling to retain market share.
In the fiscal year 2024, LIC experienced a marginal growth of 0.22% in total premium income, reaching ₹4.75 lakh crore. In contrast, private insurers saw a robust 12.11% rise in new business, totalling ₹1.55 lakh crore, resulting in a slight decline in LIC's market share to 58.87% from the previous year.
This competitive environment underscores the insurer's imperative to enhance financial agility and streamline its asset base to maintain its leadership position.
Historically, LIC's extensive real estate holdings have served not only as operational assets but also as symbols of trust and reliability for policyholders across the country. As the insurance landscape evolves, the insurer is strategically evaluating options to optimize its asset portfolio while maintaining its commitment to policyholder interests.
In essence, LIC's decision marks a strategic shift, navigating challenging markets to seize emerging opportunities. As developments unfold, stakeholders will closely monitor how LIC manages this transformation, ensuring alignment with its long-term growth objectives while safeguarding its market leadership in the insurance sector.
..............................................................................................
News9 is India's first fully integrated English news brand across all digital platforms. It includes a publishing platform, viz. www.news9live.com, a future-ready OTT platform, News9 Plus, and a 24-Hour video streaming service on connected TVs and all social platforms.
It's the English news brand that understands and fits perfectly into the digital-first lifestyles of our English news audiences.
► News9 Plus App : https://onelink.to/8pwfkc
► News9 OTT Coupons : https://bit.ly/4dwLDx4
► Watch us on YouTube : / news9live
► Like us on Facebook : / news9live
► Follow us on Instagram : / news9live
► Follow us on Twitter : / news9tweets
Информация по комментариям в разработке