LIC Shares Surge 4.1% on Reports of Plans to Pay Dividend, Issue Bonus Shares

Shares of life insurance corporation (LIC) rose 4.1% to trade at Rs 611.1 during intraday trading Monday on the BSE, following reports that the company plans to shift almost $22 billion of policyholder funds to a fund designated for paying dividends or issuing bonus shares. According to the Reuters report, LIC is planning to transfer about $22 billion from policyholders funds into a fund earmarked for paying dividends or bonus shares. The move is intended to strengthen both its networth and investor confidence. LIC was listed on Indias exchanges in May, but since then, its shares have fallen by more than 30%. 

The excess from non-participation funds is set aside for shareholders, Reuters reported, and could be transferred to shareholder funds if approved by the board of LIC, a move that has not been sought so far. The transfer, if completed, will increase LICs net worth about 18 times from the current value of around Rs105 billion, it added, and will lead the list of the highest net worth performers among insurance companies, including SBI Life and HDFC Life. The highest stock price target is as high as Rs 1000, according to Trendline data, with the median estimate of Rs 853.9 showing potential gain of about 44.1% over the current price. 

The stock has fallen almost 10 per cent over the past three months, and has already lost over 30 per cent since state-run insurance company listed on Indian exchanges in May. LIC shares debuted with an 8.62 per cent discount to Rs 867.20 on May 17 this year. It closed at Rs 595.45 on Oct 27, representing a fall of more than 31 per cent from the issue price. Compared with its all-time record high of Rs 920 on the listing day, the share is down by 35.65 per cent so far. 

The ongoing war between Russia and Ukraine, economic slowdown, and high volatility in the global and domestic markets has tempered the mood towards the LIC shares. Some analysts also blamed a share correction on high share prices in the insurance companys IPO. The company offered its shares at the price range of Rs 902-Rs 949 at the time of IPO.

It has not announced any earnings so far for September quarter. LIC reported an all-time high earnings for the quarter ended June 2022.  

Net profit rose to Rs 682.88 crore in Q1 from an autonomous profit of Rs 2.94 crore in the corresponding quarter last financial year. LICs net premium revenue rose by 20.35% YoY to Rs 98,351.76 crore. Other revenues were at Rs 160.09 crore in Q1FY23 as compared with Rs 145.47 crore in Q1FY22.