LIC Shares Surge Over 4%, Know Why the Stock is Rallying

LIC Bonus Shares, Dividend: Shares of Life Insurance Corporation (LIC) rallied 4.1 per cent to Rs 617.1 in Monday’s intraday trade on BSE after the reports said the company is planning to transfer nearly $22 billion from policyholders’ funds into a fund earmarked to pay dividends or issue bonus shares.

According to the Reuters report, LIC is planning to transfer around $22 billion from policyholders’ funds to a fund meant to pay dividends or bonus shares. The move is aimed to shore up both its own net worth and investor confidence.

LIC was listed on the Indian stock exchanges in May, but its stock has since dropped over 30 per cent.

The surplus in the non-participating fund is earmarked for shareholders and can be transferred to the shareholder’s fund with approval from LIC’s board, which is yet to be sought, Reuters reported.

The transfer, if concluded, would boost LIC’s net worth by about 18 times its current value of about Rs 105 billion and top the net worth chart among insurers, including SBI Life and HDFC Life, it added.

As per Trendlyne data, the highest target for stock goes up to Rs 1,000, while the average estimate of Rs 853.9 shows an upside of the potential of around 44.1 per cent from current prices.

The stock has fallen nearly 10 per cent in the last three months, while it has plunged more than 30 per cent since the state-owned insurer listed on the Indian stock exchanges in May.

LIC stock made its debut at a discount of 8.62 per cent at Rs 867.20 on May 17 this year. It closed at Rs 595.45 on October 27, implying a decline of over 31 per cent to the listing price. Compared to the record high of Rs 920 on a listing day, the stock is down 35.65 per cent till date.

The ongoing Russia-Ukraine war, economic slowdown and highly volatile global and domestic market conditions have dampened sentiment around the LIC stock.

Some analysts have also attributed the correction in the stock to the high IPO price of the insurer. The company offered its shares in a price band of Rs 902-Rs 949 during the IPO.

It is yet to announce its earnings for the September quarter.

LIC reported a stellar set of earnings for the quarter ended June 2022. Net profit rose to Rs 682.88 crore in Q1 against a standalone profit of Rs 2.94 crore in the corresponding quarter of the last fiscal. Net premium income of LIC climbed 20.35 per cent YoY to Rs 98,351.76 crore. Other income came in at Rs 160.09 crore in Q1FY23 against Rs 145.47 crore in Q1FY22.