Shares of Life Insurance Corporation (LIC), India's largest life insurer, bounced back strongly in the last two trading sessions, surging 6% to ₹601.70 apiece, after hitting an all-time low of ₹567.75.
The stock has been under tremendous pressure since January 24, owing to concerns over its exposure to the Adani Group, which has been embroiled in a series of allegations ranging from stock manipulation to high levels of debt, levelled by the short seller Hindenburg Research.
From January 24 to February 27, the stock has lost nearly 19% of its value, resulting in a market capitalization loss of nearly Rs. 40,000 crore during the period.
According to the data from Trendlyne, LIC has holdings in seven Adani Group companies. The value of these holdings has been significantly impacted as the stocks of Adani Group have tumbled sharply.
On January 30, the insurance behemoth said it has an exposure of ₹36,474.78 crore to the Adani Group's debt and equity, and the amount is less than one percent of the national insurer's total investments. Later, the company also said it will meet with the top management of the Adani Group and seek clarification on the crisis.
On May 17, 2022, LIC made a rough start on the exchanges as it was listed 8.62% below the issue price of ₹949. It closed at Rs. 875.25 on the same day, which is 7.75% less than the IPO price.
In less than a month, the stock dropped to ₹654 levels and has never traded above the IPO price of ₹949 to date. Currently, the stock is trading 36.5% below its issue price.
Despite such weak performance, domestic brokerage firms have remained bullish on the stock following the company's robust December quarter performance. In Q3 FY23, the state-run insurance giant reported a multi-fold surge in its consolidated net profit at ₹8,334.2 crore, compared to ₹235 crore in the year-ago quarter.
For the 9MFY23, the net profit stands at ₹22,970 crore as compared to ₹1,672 crore in the same period of the last fiscal.
LIC’s net premium income in Q3FY23 grew 14.5% YoY to Rs. 1,25,474 crore, led by a strong 31.2% YoY growth in single premiums. The insurer's income from investments rose to ₹84,889 crore in Q3FY23 from ₹76,574.24 crore a year ago.
The Assets Under Management (AUM) increased to ₹44,34,940 crore during 9MFY23 as compared to ₹40,12,172 crore in the same period last year, registering an increase of 10.54% year on year. In 9MFY23, new policies increased by 1.92% to ₹1.28 lakh crore.
The company solvency ratio, the measure of an insurer's ability to meet its long-term debt obligations, improved to 1.85(x) in 9MFY23, up from 1.77(x) in 9MFY22.
Following the release of the third quarter earnings, brokerage firm Geojit Financial Services reiterated its "buy" rating on the stock, with a target price of ₹765 apiece. On similar lines, ICICI Securities also maintained its "buy" rating on the stock with a target price of ₹917 apiece.
13 analysts polled by MintGenie on average have a 'strong buy' call on the stock.
Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not MintGenie.