Subdued since listing, when will LIC share price reverse the trend? Analysts decode

LIC share price nse, bse: Life Insurance Corporation of India's (LIC) share price has remained subdued since its listing in May this year. And this begs the question that for long will the shares of the insurance behemoth continue to lag, in spite of it being the undisputed leader in its industry?

The shares of the state-owned insurer have cracked 22 per cent and 16 per cent from its issue price of Rs 949 per share and listing price of Rs 875 per share, respectively. The insurance company saw a tepid debut on exchanges after launching the biggest-ever Initial Public Offer (IPO) earlier in 2022.

What’s stopping LIC stock from breaching issue price level?

According to Vinit Bolinjkar, Head of Research, Ventura Securities Ltd, “Growth in embedded value (EV) will play a key role in LIC’s share price performance. Improvement in Value of New Business (VNB) margins is important for embedded value growth.”

Also Watch: Bull Vs Bear: What Are The Triggers Behind The Movement In LIC Share

The margin improvement is only possible through the growth in retail VNB, where LIC is losing market share, the analyst at Ventura Securities said. Here, Embedded Value is one of the indicators representing the corporate value of life insurance companies, that is attributed to shareholders.

While VNB is the present value of future earnings from policies issued and reflects the additional earnings expected to be generated through the new policies issued.

LIC’s performance in 2022

The company’s gross VNB grew at a Year-on-Year (YoY) rate of 57.8 per cent in the first half of the financial year 2022-23 (H1FY23), while net VNB margins improved to 14.6 per cent in H1FY23. The growth in VNB was largely driven by group business, up 140 per cent YoY, as per the analyst.

Also Read: EXCLUSIVE: LIC Chairman M R Kumar says VNB margins to rise up to 25 per cent in 4-5 years, asks shareholders to remain patient

He added that the rise in bond yields mainly due to multiple rate hikes by the Reserve Bank of India (RBI) also impacted LIC’s embedded value, which remained muted in H1FY23 at Rs 5.44 trillion against Rs 5.41 trillion and INR 5.40 trillion at the end of FY22 and H1FY22, respectively.

Moreover, LIC is losing market share in the retail insurance business, where the margins are higher – somehow impacting the share price of the company, Bolinjkar said and added that to improve the retail insurance business, LIC is working on the bancassurance channel with new tie-ups.

When will LIC stock touch new high?

At present, the stock of LIC is down nearly 20 per cent from its 52-week high level of Rs 920 per share, which was touched on the day of listing – May 17, 2022. The stock has the potential to rise further and looks quite good on the charts, technically, TradeSwift Director Sandeep Jain said in his comment.

Also Read: Government seeks private sector chief to lead state insurer LIC, sources say; stock sees sudden spike

He believes that shares of insurance companies such as LIC, New India Assurance, and General Insurance Corporation are catching up with the rally and hence have been buzzing for the last few days. LIC shares were up nearly 3 per cent on Tuesday to touch a day’s high level of Rs 754.40 per share on the BSE intraday.

Jain sees the LIC share price may touch a new high of Rs 1100 per share on long-term basis on the back of a positive business outlook. According to him, the overhang such as OFS and privatisation fear may affect share price growth as he cited recent example of IRCTC Offer-For-Sale (OFS) announced by the government.