1:1 Bonus Issue Of Largest Insurance Stock: Why Did LIC Shares Crash By Over 50% On May 29? Should You Worry?

Life Insurance Corporation Of India (LIC), the largest insurance stock and a PSU behemoth, crashed by more than 50% on BSE and NSE during the trading session of May 29, 2026. This is due to the LIC's 1:1 bonus issue, whose ex-date is on Friday. Should investors worry?

LIC Share Price:

At the time of writing, LIC shares traded at Rs 412.20 apiece, down by Rs 2.80 or 0.65% on NSE, with market cap of Rs 5,21,559.31 crore.

However, in the early trade, LIC dropped to hit an intraday low of Rs 411.45 apiece, which is a steep decline of 50.4% from the previous closing price of Rs 830.

The reason behind this huge crash is LIC's 1:1 bonus issue and investors should not worry about it.

LIC Bonus Issue:

The PSU megagiant turned ex-date for its first-ever bonus issue of a 1:1 ratio on May 29, which is also the record date. This means all those shareholders having LIC shares in their portfolio as of May 29, 2026, will be eligible to receive 1 free share for every existing 1 equity share.

For instance, if you hold 100 shares of LIC as of May 29, 2026, then you will get another 100 shares. This will take the total number of shares to 200 shares of LIC. However, if you buy LIC shares after May 29, you will not be eligible for the benefit.

Any listed companies fix record dates to identify eligible investors for rewards like stock splits, bonus issues and dividends.

However, there are certain impacts of bonus issues, which is the main reason why LIC shares halved on May 29. Here's what you need to know!

First, a bonus issue can be announced by any listed company. The bonus is declared in a certain proportion only to the existing shareholders. The investor is not required to pay any extra money for these bonus shares. Meaning, bonuses are free of cost.

A listed company pays a bonus through its free reserves and surplus.

However, the effects of bonus issues are:

- Increases the number of outstanding equity shares

- Reduces share price in proportion to the number of bonus shares issued.

- Reduces free reserves and surplus of the company.

- Creates implicit value per equity share.

- Increases liquidity in the equity shares on the stock exchanges.

- Reduces per share ratios such as earnings per share, or book value per share, among others.

Let's say you held 100 shares of LIC at Rs 800 each. Assuming no market reaction on the bonus record date, at a 1:1 bonus issue ratio, you will receive 100 free shares (100 existing shares x 1/1), which will take your total number of shares to 200 shares, but the share price value will be reduced to Rs 400 each. So theoretically, there is no surge or fall in your portfolio; your wealth remains the same.

Furthermore, the earnings per share will decline due to bonus issue adjustments. Example: If the company earned Rs 200 crore and holds 200 shares pre-bonus, its earnings per share will be Rs 1. Assuming profits are unchanged, post bonus issue, at a 1:1 ratio, the company will have 400 shares, but its EPS will be Rs 0.5. Hence, no increase in wealth.

This is just an example to understand the impacts of bonus issues.

LIC Share Price Recommendation:

The consensus recommendation from 23 analysts for Life Insurance Corp is BUY, as per Trendlyne data. The target price is set at Rs 1051.00 apiece. This is pre-bonus target price and based on LIC's fundamentals.

Recently, analysts at Emkay Global said, "IC delivered a strong Q4FY26 performance, with VNB margin at 25.7% (+6.9ppt YoY) beating our estimate of 20.5%; APE stood at Rs229.5 billion (+21.8% YoY), higher than our estimate of Rs212.8 billion. The strong VNB margin delivery during the quarter was driven by robust growth in the non-par segment and favorable movement in the yield curve. The Board declared a final dividend of Rs10/sh (pre-bonus: Rs20/sh) and remains conservative on maintaining solvency capital given that the implementation of 'Risk Based Solvency' could impact solvency capital after the transition."

Going ahead, analysts said, "while the corporation will see consolidation with respect to its product mix, the management remains focused on growing the absolute VNB. To bake in the Q4 developments, we increase our APE estimates by 4-5% while raising our VNB margin estimates by 200-240bps; this results in ~15-16% increase in VNB over FY27-28E. We maintain BUY on LIC and increase Mar-27E TP by 10% to Rs1,100 (from Rs1,000) implying FY28E P/EV of 0.7x."

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