LIC shares in focus as shareholder lock-in period expires; stock down 36% since listing

Life Insurance Corporation of India (LIC) shares will be in focus on Monday morning amid the lock-in expiry of its shares wherein some 126.50 crore shares, or 20 per cent of outstanding shares worth Rs 76,861.37 crore (over $9 billion) will be freed up for trading following the end of lock-in period.

The LIC stock got listed on stock exchanges on May 17, 2022. The IPO, which was subscribed 2.95 times, raised Rs 21,008.48 crore and was India's biggest ever IPO.  The LIC share, however, is trading at a 36 per cent discount to its issue price of Rs 607.60.

The largest domestic life insurer last week said its profit halved to Rs 7,925 crore in the September quarter from Rs 15,952 crore in the year-ago quarter, , hurt by a fall in premium income. Net premium income, LIC said, fell 19 per cent to Rs 1.07 lakh crore from Rs 1.32 lakh crore in the same quarter last year. The first-year premium for the quarter advanced to Rs 9,988 crore from Rs 9,125 crore YoY.

As far as the stock's prospects go, Motilal Oswal Securities said: "LIC has levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments (mainly Protection, Non-PAR, and Savings Annuity). However, changing gears for such a vast organisation requires a superior and well-thought out execution plan. We expect LIC to deliver a 3 per cent CAGR (decline in FY24 and a sharp recovery in FY25) in APE over FY23-25, thus enabling a 9 per cent VNB CAGR," it said.

It though expects operating RoEV to remain modest at 10.5 per cent, given its lower margin profile than private peers and a large EV base.

"LIC is trading at 0.6x FY24E EV, which appears reasonable, considering the gradual recovery in margin and diversification in the business mix. We cut our VNB estimates to factor in the decline in VNB margins. However, we raise our EV estimates owing to better-than-expected equity market returns. We reiterate our BUY rating with a target of Rs 850 (0.7x Mar’25E EV)," it said.

Emkay Global said it continues to perceive structural challenges—such as slower growth-led market-share loss, sticky operating expenses, and higher sensitivity to equity market-led EV volatility—to cloud LIC’s outlook.

"However, LIC is currently trading at 0.50 times Sep-25E P/EV, with the structural challenges and a possible share sale by the government already in the price. We upgrade the stock to BUY, as we believe higher surplus generation and slower growth could lead to a step jump in dividend, as solvency is healthy. Our fair value Sep-24E target price is Rs760 per share (offering 25 per cent upside), and we value the shares at 0.63 times Sep-25 EV," it siad.

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