Since Stock Debut, LIC’s Market Cap Shrinks Nearly Rs 2 lakh Crore, Q3 Profits Raise Hopes Of Recovery

In the third quarter (Q3) of FY2023, Life Insurance Corporation of India (LIC) posted a robust net profit compared to the year-ago period, boosted by premium income.
Since Stock Debut, LIC’s Market Cap Shrinks Nearly Rs 2 lakh Crore, Q3 Profits Raise Hopes Of Recovery

A year after the Life Insurance Corporation of India’s (LIC) lacklustre debut in the stock market, its value eroded by nearly Rs 2 lakh crore. LIC’s market capitalisation fell from Rs 5.48 lakh crore at the time of listing on May 17, 2022, to about Rs 3.58 lakh crore now, dragging down its status from India’s fifth most valuable company to the 13th position.

LIC shares were priced at around Rs 566 apiece in intraday trading on the Bombay Stock Exchange (BSE) on Wednesday, with a market capitalisation of Rs 3,58,500 crore.

Despite the stock’s lacklustre show over the past year, LIC’s robust third-quarter FY2023 results may have lifted the investors’ spirits. The company has made substantial profits compared to the year-ago period. Mint reported that its consolidated net profit in Q3 increased to Rs 8,334 crore from Rs 235 crore in the same period a year ago, boosted by premium income.

LIC’s quarterly performance also shows that it continues to be a valuable asset in the long term. Still, some experts believe the volatility in LIC shares may continue in the short term, given the domestic and international headwinds, before a clear picture emerges.

Listing Debacle

Although it was India’s largest initial public offering (IPO), the LIC stock debuted at an 8 per cent discount, a fall it has yet to recover. Moreover, the share price dropped by about 35 per cent from the listing price and by 40 per cent from the upper band of its IPO price. With such a blow, its performance vis-a-vis the Sensex and Nifty50 has been expectedly disappointing over the past year. The LIC issue price of shares was Rs 949 apiece, but it sold at a discount of 8.62 per cent or Rs 867.20 on the BSE, despite garnering massive interest from the investors during the IPO. The debut may have been vitiated by multiple headwinds, from weak market conditions and changes in tax policy to the Adani-Hindenburg row.

Hopes For The Insurance Sector

Experts believe the insurance sector will continue to grow, given the positives in the long-term, which will outweigh the short-term concerns like the government proposal to remove the tax-free status on certain life insurance policies with a premium above Rs 5 lakh. They believe the Covid-19 pandemic gave a massive boost to the sector as more people bought life insurance products.

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