LIC Shares Hit Back To Back Fresh Low: Here's Why

LIC shares are on a back to back basis are hitting fresh low. Today in a weak market, share of Life Insurance Corporation of India plunged yet again to hit a fresh low of Rs. 757.1 per share on the NSE. The 52-week low price on the BSE is of Rs. 757.1 per share. On the continued share price plunge, the public sector insurer's m-cap has come down to Rs. 4.8 lakh crore.

Why there is free-fall in the shares of LIC?

The concerns for the LIC have come through post its listing and they are as below:

1. The largest insurer's capabilities are now being questioned as to its competence to compete with large private players.

2. Also, the ongoing market volatility is seen to have an impact on the insurer's embedded value. For insurance companies, the embedded value is a measure of its performance. Typically it is the sum of adjusted net worth and value of in-force business or estimated future profits.

What experts and analysts' make of LIC stock?

Experts are not suggesting any fresh positions into the stock given the weak earnings. Also, as the 1-month anchor lock in shall come ahead in some time, there will be built further pressure on the stock.

As per a leading dailies which cited Sumeet Bagadia of Choice Broking is of the view that LIC counter shall fall further to Rs. 750 and investors with a long term view can continue to hold the counter and average it on every 5-6% dip, only once the stock is around Rs 750 levels.

Furthemore, brokerage firm Emkay Global states, "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% of EV each year from VNB, as against ~8-11% in the case of private life insurers". For the stock, the company has given the target of Rs. 875 per share.

The key disadvantages preventing the company from growing as per the brokerage are its size and legacy i.e. holding it back from changing its product as well as distribution mix.