LIC raises stake in SAIL to 8.687% via open market purchase; should you buy this steel stock too?
2 min read 09 Jun 2023, 09:04 PM ISTLIC has increased its stake in government-owned steel producer SAIL by 2.001% to 8.687% in an open-market purchase. The insurer bought over 8.26 crore equity shares in SAIL between October 14, 2021, and June 8, 2023, at an average cost of ₹66.18 apiece.
PremiumIndia's largest life insurer, LIC has hiked its shareholding in government-owned leading steel producer, SAIL. The insurer's stake has been raised by 2.001% to 8.687% in SAIL. The transaction was carried out in an ordinary course in the open market and in tranches. Notably, brokerage ICICI Securities on Friday recommended an ‘Add’ on SAIL stock.
As per the regulatory filing by LIC, the insurer has increased its shareholding from over 27.61 crore equity shares to 35.88 crore equity shares in SAIL.
This means that LIC's stake of 6.686% is increased by 2.001% to 8.687% of the paid-up capital of SAIL.
The shares were bought at an average cost of ₹66.18 apiece in SAIL.
LIC revealed that the stake increase of 2.001% was done during the period from October 14, 2021, to June 8, 2023. The transaction was an open-market purchase.
From October 14, 2021 to June 8th this year, LIC has bought over 8.26 crore equity shares in SAIL.
Read here: Bank of Maharashtra raises ₹1,000 cr via QIP, LIC gets biggest allocation
But by the end of the March 31, 2023 quarter, LIC's shareholding stood at 28.64 crore equity shares in SAIL, as per the latest shareholding pattern.
Hence, from April 1st to June 8th, LIC purchased over 7.24 crore equity shares in SAIL.
SAIL is one of the largest steel-making companies in India and one of the Maharatnas of the country's Central Public Sector Enterprises. SAIL manufactures and sells a broad range of steel products.
Taking into consideration the current market price of SAIL, LIC's shareholding in this steelmaker is valued to around ₹2,974.52 crore.
On BSE, SAIL's share price closed at ₹82.90 apiece down by 1.38%. While LIC's share price closed at ₹601.75 apiece marginally down on Friday compared to the previous session.
ICICI Securities in its research note for metal sector dated June 9th, has recommended an 'ADD' on SAIL stock with a target price of ₹92 apiece.
Read here: LIC hikes stake in Tech Mahindra to 9%
Last month, Centrum in its research note dated May 30th, said on SAIL that the Q1FY24 EBITDA/t was likely to moderate sequentially on account of the decline in steel price and increase in coal cost due to the lag effect.
Analysts at Centrum in the note said, "We see larger benefit of decline in coal price to accrue from Q2FY24 onwards. We estimate EBITDA to grow by 26% CAGR over FY23-25 on back of higher volume and lower CoP offset by lower realisation. Further, we estimate EBITDA/t of Rs7000-7200/t in FY24-FY25 vs ~Rs5000/t in FY23. The working capital release and expected payment of outstanding dues from railways for FY22 sales will help net debt to decrease to Rs257 billion by FY24 end. We recommend BUY rating and value SAIL at 5.0x FY25E EV/EBITDA for target price of Rs94."
It needs to be noted that LIC has been increasing its stake in a couple of stocks. On June 7th, the insurer increased its stake to 8.884% in IT player Tech Mahindra from earlier 6.869%. In this tech firm, LIC increased its shareholding by 2.015% in the open market from November 21, 2022, to June 6, 2023.
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