There is no respite for Life Insurance Corporation of India from sellers, as the stock continued its slide for the seventh day in a row to record an all-time low of ₹566 on the BSE on Monday. The insurance major’s stock closed at ₹567.75, down 2.9 per cent on the BSE, as its exposure to Adani stocks now turned negative.
The stock has tumbled nearly 20 per cent year-to-date. Shares of LIC, which were listed on the bourses on May 17 last year, are now trailing by about 40 per cent against its issue price of ₹949 a share. It had hit a high of ₹920 on the listing day.
Budget trigger slide
The initial selling came when Finance Minister Nirmala Sitharaman’s Budget 2023 proposed to tax income from life insurance policies (expect ULIP) having a premium or aggregate premium above ₹5 lakh in a year. This triggered a sharp fall in the price of insurance stocks.
After the meltdown in Adani stocks, the insurance major saw increased pressure at the bourses.
LIC had put out a statement on January 30, that it was still sitting on ₹26,000 crore of gains (notional) in their Adani Group investments even post the few days of rout following the release of the Hindenburg report. However, the destruction of Adani stocks turned its investments into the group negative, if one goes by the LIC statement.
Experts advised investors not to buy the stock on expectation of averaging cost. “It appears the recovery may not happen anytime soon. Even if the the stock attempts to bounce back, there will be a lot of selling pressure as some would to try to exit the stock,” a Chennai-based market analyst said.
However, brokerages and analysts expect a decent return from LIC stock, after its Q3 numbers earlier this month.
According to YES Securities, which came out with a Buy rating with a price target of ₹770 in its February 10 report: Management states that LIC’s market share in ULIP is small and there is more headroom for this product line to grow. However, its impact on margin will be offset by Non-Par Savings (Non-ULIP) and annuities, it said and added ”It may be noted that there have been six new product launches in 9M, all in the Non-ULIP Non-Par segment, barring one.”
Motilal Oswal Financial said (Feb 10 report) LIC has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments. “However, changing gears for such a vast organisation requires a superior and a well-thought out execution plan. We expect LIC to deliver a 15 per cent CAGR in APE over FY23-25,” it added.
Emkay Global Financial Services in its Q3 update has maintained its ‘Neutral’ rating on LIC saying “there is very little (relative to EV) value creation from the new business and the sustained market share loss in retail business continues.
In a recent annual Tamil Nadu Investors Association (TIA) meet, Deepak Shenoy of Capital Minds picked LIC as one of the stock ideas. According to him, earlier structure of profit sharing with policyholders and government was changed and that could result in transfer of ₹6,000 crore to shareholders in every quarter.