A year after hitting the markets with an initial public offering (IPO), shares of Life Insurance Corporation (LIC) closed at ₹567 on Tuesday, nearly 40 per cent below the issue price of ₹949.

The insurance behemoth has lost close to ₹2-lakh crore in market capitalisation since its listing.

Last May, the Centre, which owns a majority stake in the insurance company, offloaded over 22.13 crore shares or 3.5 per cent stake through the IPO at a price band of ₹902-949 per share to raise ₹21,000 crore.

The retail investors and eligible employees of LIC were offered a discount of ₹45 per equity share over the issue price, while policyholders got a discount of ₹60 per share.

Underperformer

Manish Chowdhury, Head of Research, Stoxbox, said LIC has been an underperformer in the insurance space despite being the largest in the country.

The life insurer had its own set of vagaries which undermined its performance including stiff competition in the insurance sector from private players, exposure to Adani Group stocks and perception of a potential government interference, he said.

However, multiple parameters such as good performance on the total annualised premium equivalent compared with peers, lower impact of the recent Budget changes and rejig in product mix towards protection business should start yielding results going forward, he added.

“With LIC available at a steep valuation discount compared with private peers, we believe that the current price offers an ideal opportunity from a medium- to long-term perspective,” he added.

Robust Q3

LIC’s net profit grew multifold to ₹6,334 crore in Q3 FY23 against ₹235 crore logged during the same period last year. However, on a sequential basis, the net profit decreased sharply as the net profit in the September quarter was ₹15,952 crore.

Also read: IOC likely to post better performance sequentially in Q4 FY23 

LIC’s net premium income grew 14 per cent in December quarter to ₹1.11-lakh crore (₹97,620 crore), while the new business premium grew to ₹9,725 crore (₹8,749 crore).

Budget impact

Gaurang Shah, Senior Vice-President, Geojit Financial Services, said that the growth may be slower due to the recent Budget announcements.

“However, there is a huge market as far as ‘Insuring the Uninsured’ is concerned and this will not only create opportunities for LIC, but also for the other related entities such as HDFC Life, ICICI Prudential and SBI Life,” he added.

The Union Budget for FY24 has proposed that proceeds from the insurance policies with premiums in excess of ₹5 lakh will be taxed.

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