LIC hits fresh record low; falls 32% below issue price

Shares of Life Insurance Corporation of India (LIC) continued its losing streak for the second day and touched its lowest level since market debut on May 17. The share price of LIC dropped as much as 0.7% to hit its lowest level of ₹648, slipping nearly 32% below its initial public offering (IPO) price of ₹949. LIC has turned out to be one of the worst performing initial public offering (IPO) of this year, eroding investors’ wealth by ₹1.9 lakh crore as market capitalisation dropped to ₹4.1 lakh crore as compared to the valuation of around ₹6 lakh crore during listing.

At the time of listing, LIC was the 5th biggest listed firm in terms of market capitalisation after Reliance Industries, Tata Consultancy Services (TCS), HDFC Bank, and Infosys. Due to sustained selling in its shares by investors, LIC’s ranking has slipped to 14th position, with the likes of Hindustan Unilever Ltd (HUL), SBI, Bharti Airtel, ICICI Bank, Adani Transmission, ITC, Bajaj Finance, HDFC, Adani Enterprises surpassing its market cap.

LIC shares have fallen 3% in a week and 4% in the past one month. On a year-to-date (YTD) basis, it delivered a negative return of 26% to its shareholders. The stock hit a 52-week high of ₹920 on its listing day, i.e. May 17.

The state-owned insurer had raised ₹20,557 crore in the country’s biggest-ever IPO last month after the government offloaded a 3.5% stake in the company at an offer price of ₹902 to ₹949 per share. The IPO received a tremendous response from investors, with the issue oversubscribing 2.95 times.

For April-June quarter of 2022 (Q1 FY23), the insurance behemoth reported a sharp rise in its net profit at ₹682.89 crore, compared to ₹2.94 crore in the Covid-disrupted last year’s June quarter. On a sequential basis, the insurer’s net profit dropped from ₹2,371 crore in March quarter of 2022. The total income stood at ₹1,68,881 crore in Q1 FY23, versus ₹1,54,153 crore in the year-ago period and ₹2,11,451 crore in the March quarter.

For the quarter ended June 2022, LIC registered an increase of 20.35% in the total premium income at ₹98,352 crore as compared to ₹81,721 crore in the corresponding period of the previous year. On an annualised premium equivalent (APE) basis, the total premium was ₹10,270 crore for the quarter under review. Of this 62.80% (₹6,450 crore) was accounted for by the individual business and 37.20% (₹3,819 crore) by the group business.

The asset under management (AUM) increased to ₹41.02 lakh crore as compared to ₹38.13 Lakh crore in Q1 FY22, up 7.57% on yearly basis. As of June 2022, LIC had agency strength at 1.33 million, as compared to 1.34 million as of June 30, 2021. The percentage of agents working in rural areas was 48% whereas the remaining 52% operated in urban areas.

Post Q1 results, global brokerage Macquarie Capital Securities had upgraded the stock to "outperform" from "neutral", citing its low valuations. The brokerage firm, however, lowered its price target by 15% to ₹850.

Domestic brokerage Motilal Oswal also maintained its “buy” rating on LIC shares with an unchanged target price of ₹830, saying that its cheap valuation “appears reasonable, considering the gradual recovery in margin and diversification in the business mix”.