LIC's stock reaches highest-level since IPO: How it benefits investors?
What's the story
Life Insurance Corporation of India (LIC) has experienced a remarkable 75% surge since late March 2023. It has reached its highest stock value following its initial public offering (IPO) in May 2022. Today, the state-owned life insurer's stock rose by 1.9%, coinciding with a broader increase in Indian equities that added approximately $30 billion to LIC's market value. Analysts attribute this rally to an appealing valuation, a brighter outlook for its premium business, and the potential for increased dividend payouts.
Finance
Centre raised $2.7 billion by selling LIC stocks
The Narendra Modi government raised $2.7 billion by selling stocks in India's biggest life insurance firm. Its investors included millions of families, who also own the company's various policies. Now, their patience with LIC has been rewarded, thanks to hefty gains in India's broader equity market. To note, LIC has funds of over $100 billion in its kitty.
Conditions
Factors driving LIC's rally
Avinash Singh, an Analyst at Emkay Global Financial Services Ltd, recommends purchasing the stock. He said, "The rally in shares seems to be largely driven by a highly attractive valuation, which is already more than pricing in the structural challenges." Singh also mentioned that a growing cash reserve indicates a higher dividend payment could be on the horizon. However, not everyone shares this optimistic view.
Problems
Challenges remain for LIC
Antique Stock Broking Ltd. contends that LIC's sluggish growth, elevated costs, and dwindling market share will result in the stock continuing to trade below its estimated embedded value (a measure of a firm's shareholder value) of $85.73 billion. Before the recent rally, the company's massive size, low-profit margins, and inflexible sales model compared to nimbler private competitors, had caused a 40% decline in its stock price below the offering price.
Shares
A look at LIC's stock prices
Today on the National Stock Exchange (NSE), LIC opened at Rs. 922.50 per share and touched a high of Rs. 955. It finished trade at Rs. 933 apiece, which is up 1.9% in comparison to yesterday. Meanwhile, on the Bombay Stock Exchange (BSE), it finished at Rs. 932.75 (up 1.82% from the previous day).