Shares of Life Insurance Corporation of India (LIC) were reeling under pressure, falling 2 per cent to Rs 786.05, on the BSE on Monday. The shares hit their lowest level since listing, with the market capitalistion (market-cap) of the state-owned life insurer breaching below the Rs 5-trillion-mark.
The stock was trading down for fifth straight day, sliding 6 per cent during the period. In comparison, the S&P BSE Sensex shed 0.83 per cent in a week. LIC had made a weak stock market debut on May 17, 2022 as it listed at nearly 8 per cent below its issue price. With today’s fall, LIC has slumped 17 per cent below its issue price of Rs 949 per share in a week.
The Rs 20,557-crore IPO, India’s largest ever, was subscribed just 2.95 times. While retail investors got the allotment at Rs 905 per share, LIC’s policyholders were allotted shares at Rs 889 per share.
Last week, brokerage firm Emkay Global Financial Services initiated coverage on LIC with a ‘hold’ rating and a target price of Rs 875 – up around 11 per cent from current levels.
Highlighting the rationale behind their neutral view, the brokerage firm said the state-insurer is underpinned by three factors: low value of new business (VNB) relative to embedded value (EV), which limits the potential-RoEV to near premium-unwind rate; lower annual premium equivalent (APE) growth and margin prospects versus private sector peers, as LIC’s higher commission costs and opex (excl. group fund mgmt. biz) limit the scope for product and channel diversification; and inherent volatility in EV as ~35 per cent of non-par assets are in equity with no track record of EV movement under the new fund bifurcation structure.
Though analysts remain optimistic of the state-insurer’s market leadership and comfortable valuations, they prefer private sector peers with better growth and profitability outlook, thereby, generating higher RoEV. CLICK HERE FOR FULL REPORT