Public shareholding norms: LIC gets 10 more years to comply; stock zooms 7%

Shares of insurance major Life Insurance Corporation of India (LIC) surged 7% today after the company received a 10-year exemption to achieve a 25% minimum public shareholding. The latest decision means the insurance giant can comply with the minimum public shareholding rule of capital markets regulator SEBI by May 2032.

"The Department of Economic Affairs, Ministry of Finance vide Office Memorandum dated December 20, 2023 has decided in the public interest, to grant a 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," LIC says via a stock exchange filing.

The government rules say the company, where the outstanding listed shares are two crore or more and the m-cap is ₹1,000 crore, has to mandatorily maintain public shareholding of at least 25%.

The share of the life insurer surged as much as 7% to hit a 52-week high at ₹820.05 today before settling at ₹796, up 4.23% as compared to the previous session close. The shares of LIC are currently trading at 35.3% up from the 52-week low touched on March 29, 2023. At the current share price, its m-cap stands at ₹5.03 lakh crore.

Shares of LIC have surged 30.93% in the past month, while the counter has given a 24.14% return in the past six months. In the year-to-date and one-year periods, LIC share has risen 24.19% and 12.34%, respectively.

Among the brokerages, Kotak Institutional Equities has retained a "BUY" rating on the LIC stock, with the possibility of a 55% upside, adding that the recent rally in the shares could be due to hype around its new non-par product 'Jeevan Utsav'. Kotak says the LIC stock remains inexpensive, and has assigned lower multiple to core business and its weak performance since its listing.

Emkay also retained its 'BUY' rating last month, raising its target price to ₹850 per share. "Though the structural challenges of slower growth-led market-share loss and bloated operating cost persist, their impact should be lower going forward than in the recent past," the brokerage said.

According to Geojit, LIC, as the market leader and a trusted name among the populace, is best positioned to benefit in the long term. "With an optimistic outlook, we reiterate our BUY rating on the stock with a revised target price of Rs. 823, based on 0.65x FY25E EV per share," the brokerage said on November 28, 2023.

In the last week, LIC has diluted its shareholding in three major holdings -- Hero Moto Corp, Dixon Technologies India, and Tata Motors. In Tata Motors, LIC reduced its shareholding from 169,802847 to 102,752,081 equity shares, slashing the stake from 5.110% to 3.092% of the paid-up capital. In Hero, LIC cut its shareholding from 22,491,571 to 18,482,495 equity shares, slashing the shareholding from 11.252% to 9.246%. In Dixon Technologies, LIC cut its stake from 29,97,913 to 17,94,395 equity shares, thereby reducing the shareholding from 5.012% to 3%.

For the second quarter that ended September 2023, LIC reported a 50% decline in net profit at ₹7,925 crore as compared to ₹15,952.5 crore in the year-ago period. The net premium income fell 19% YoY to ₹1.07 lakh crore from ₹1.32 lakh crore in the same fiscal period. The gross non-performing assets (GNPAs) declined to 2.43% as against 5.60% in the previous year, while the net NPA remained nil during the quarter under review.

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