LIC sinks 15% from highs, market value dips briefly below Rs 5 lakh crore

Stocks

Shares of the company have remained under pressure since their listing on rising concerns over its ability to compete with nimbler private sector rivals

(Representative Image)

(Representative Image)

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Shares of Life Insurance Corporation of India have fallen close to 15 percent from their post-IPO high of Rs 920 in less than three weeks of listing on May 17.

On June 6, the stock fell nearly 2 percent to hit a new low of Rs 785 with its market capitalisation briefly falling below Rs 5 lakh crore.

Shares of the company have remained under pressure since their listing on rising concerns over its ability to compete with nimbler private sector rivals and the impact of ongoing market volatility on its embedded value.

Last week, brokerage firm Emkay Global Financial Services initiated coverage on the stock with a ‘hold’ rating and price target of Rs 875 per share.

“LIC’s valuation on price-to-embedded value appears cheaper when compared with listed private players; this is justified by the fact that LIC adds merely 1.0-1.5 percent of EV each year from VNB, as against 8-11 percent in the case of private life insurers,” Emkay Global said in a note.

The brokerage raised questions over the operational challenges posed by LIC’s size. The brokerage firm valued the company at 0.9 times its one-year forward embedded value.

Much like Macquarie Securities India before it, Emkay Global raised concerns over the high portion of equity marked-to-market gains in the life insurer’s embedded value, which makes it vulnerable to downturns in the domestic stock market.

Benchmark equity indices, Nifty 50 and BSE-Sensex, have fallen more than 5 percent in the calendar year so far.

At 10:50 am, shares of Life Insurance Corporation were down 1.7 percent at Rs 786.6 on the National Stock Exchange.

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