LIC buys extra 2% stake in this Tata Group company Voltas for Rs 635 crore – brokerage recommends Buy, check target price

LIC buys extra stake in Voltas: Insurance behemoth Life Insurance Corporation of India (LIC) has increased its shareholding in Tata Group-backed consumer durable company Voltas Limited, by buying an additional 2 per cent stake.

The state-owned insurance firm LIC, which is also termed a domestic institutional investor, said that it has acquired Voltas' shares worth Rs 634.50 crore through open market transactions during the period from August 10 to November 4, 2022.

The state-owned life insurer increased its shareholding from 2,27,04,306 shares (equivalent to 6.862 per cent) to 2,93,95,224 (8.884 per cent) in Voltas, according to a regulatory filing on Monday.

Voltas earlier last week reported mute second-quarter earnings for the financial year 2022-23 (Q2FY23), wherein the consolidated revenue came at Rs 1770 crore, up 4 per cent year-on-year.

While gross margin contracted by 220 basis points YoY to 24.4 per cent mainly due to commodity cost pressures and Adjusted PAT (profit after tax) declined by 4.4 per cent YoY to Rs 99 lakh in Q2.

In Q2FY23, Voltas incurred a one-off loss of Rs 100 crore due to unilateral termination of an overseas project by the contractor and encashment of underlying bank guarantee for the same.

Nirmal Bang, a domestic brokerage, believes that margins over the medium term are likely to remain under pressure on account of higher competitive intensity across the Residential AC segment, increasing indigenization levels, which will lead to a higher cost structure and currency depreciation.

The brokerage maintains a Buy stance on Voltas with a revised target price of Rs 1,045 from Rs 1,110 earlier.

Voltas is engaged in the business of air conditioning, refrigeration, electro-mechanical projects as an EPC (engineering, procurement and construction) contractor both in domestic and international market.

Shares of Voltas ended over 1 per cent lower at Rs 834.40 apiece on the BSE, while the stock of LIC closed at Rs 633.30 apiece on BSE, up by 0.84 per cent. In comparison, BSE Sensex settled at 61,185.15 level, up nearly 0.4 per cent higher on Monday. 

With PTI Inputs