Shares of HDFC Life Insurance gained 2.10% to Rs. 471.20 apiece during Friday's trading session, bringing an end to its four-day losing streak. This rise also marked the stock's largest intraday gain in March so far.
The stock has been experiencing significant downward pressure since the beginning of February, leading to a fall of 18.80% to date. This has pushed the stock to trade at a three-year low.
The sharp fall in the stock came after the government in the FY24 Union Budget announced that it would limit the income tax exemption from proceeds of insurance policies in certain cases.
The government stated that income earned from all life insurance policies, excluding unit-linked insurance plans (ULIPs), with a premium of above ₹5 lakh will be taxable. This is applicable for new policies, issued post-April 1, and not for the existing ones.
In its result update report, Geojit Financial Services has downgraded the stock to "hold" with a revised target price of ₹520 apiece. "The government’s budget proposals to tax high-value insurance policies and drive people towards an exemption-less new tax regime should make insurance policies of tax-saving products less attractive in the future," said the brokerage.
The proposals would adversely affect the sales of some tax-saving instruments of HDFC Life and also impact the growth of Value of New Business (VNB) from FY24, it added.
The recent partnership with AU Small Finance Bank would boost HDFC Life’s distribution network and enlarge the customer network by 3 million individuals, according to Geojit Financial Services.
During the third quarter of FY23, the private sector insurer's consolidated net profit increased by 15% to ₹315 crore as compared to ₹274 crore in the same period of the previous year.
The company's solvency ratio also improved from 190% to 209% in 9MFY23. For the nine-month period ending December, the life insurer posted a profit of ₹1,001 crore, compared to ₹850 crore in the corresponding period a year ago.
31 analysts polled by MintGenie on an average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.