LIC shares hit 52-week high after the insurer gets more time to achieve 25% MPS

Shares of the leading state-run insurer LIC clinched a new 52-week high in today’s session (December 22) after the Ministry of Finance allowed a one-time exemption to the life insurance major to achieve a 25 per cent minimum public shareholding (MPS) within 10 years of listing.

“The Department of Economic Affairs, Ministry of Finance, vide Office Memorandum dated December 20, 2023, has decided, in the public interest, to grant one-time exemption to Life Insurance Corporation of India to achieve 25% Minimum Public Shareholding (MPS) within 10 years from the date of listing, i.e., till May 2032, under Rule 19A (6) of the Securities Contract (Regulations) Rules (SCRR) 1957,” said the company’s filing with the exchange.

The stock, after marking a new 52-week high of Rs 820.05 in early trade, gaining over 7 per cent, was trading 5.68 per cent higher at Rs 808 apiece on the BSE.

As per SEBI’s MPS ruling, first implemented in 2010, all listed entities in India need to adhere to the MPS norm, which says that 25 per cent of the outstanding equity of the company must be mandatorily held by the public. Public here implies non-promoter shareholders.

Shares of the life insurer behemoth are on a rising spree, and in the last one month they have generated returns to the tune of 33 per cent, while its year-to-date gains are 18 per cent.

Earlier, the company announced that it has pared its stake in Tata Motors to 3.09 per cent, while in Dixon, it has diluted its stake to currently hold 3 per cent equity.

Emkay Research, in its report dated November 28, reiterated its buy call on the stock and raised its September 24 target to Rs 850 per share. With a strong solvency of 190 per cent and healthy surplus generation amid relatively slower growth, the company is in a comfortable position to materially increase its dividend payout, noted the brokerage.

Solvency, or solvency margin, in insurance, is the extra capital that the companies are required to hold over and above the claim amounts they are likely to incur.