Shares of Life Insurance Corporation (LIC) of India fell for the fifth straight session on Monday to its all-time low by slipping below the Rs 800-mark. The stock hit its all-time low of Rs 775.40 on the BSE on Monday, down 3.1% from its previous close. The scrip ended the session lower by 2.8% at Rs 777.40 on the exchange.
The insurer’s market capitalisation slipped below Rs 5 trillion to Rs 4.91 trillion on Monday. The company is now the seventh most-valued company in terms of market capitalisation, data show. On listing, LIC was the fifth-largest company, ahead of HUL, with market capitalisation of Rs 5.53 trillion.
Analysts believe that the stock is expected to decline further as the lock-in period of 30 days for anchor investors will end mid-June. Ahead of the public offer, the insurer had raised Rs 5,627 crore from 123 anchor investors. Interestingly, over 71% of the total anchor book was subscribed by domestic mutual funds.
In a recent report, brokerage firm Emkay Global termed LIC as the “elephant that can’t dance”. “While we appreciate LIC’s market-leading position and comfortable valuations, we prefer private sector peers that have better growth, profitability and therefore higher return on embedded value (RoEV) prospects,” said the brokerage in a note dated June 1. It added that a very significant portion of LIC’s EV (embedded value) is sitting in the form of MTM (mark-to-market) gains in equity investments backing the non-par liabilities, taking the EV sensitivity to equity market fluctuations to a substantially higher level.
Brokerage firm Macquarie in its report dated May 17 had said a huge portion of the insurer’s EV consists of marked-to-market gains and any fall in the markets can significantly affect the EV. “EV is highly susceptible to equity market movements. A 10% fall in equity markets can erode EV for LIC by ~7%, much higher than private sector peers, where the impact is around 1-2%,” said Macquarie in its note.
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