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Shares of Life Insurance Corporation of India (LIC) declined in Friday's trading session to its lowest level since listing of 801 apiece on the BSE. LIC shares, that made stock market debut on May 17, 2022, are down more than 15% from its IPO issue price. 

Earlier this week on Monday, the state-run insurance behemoth reported lower profit for the fourth quarter ending March 2022. LIC share price has declined over 3% on the last five trading sessions as compared to 0.8% rise in benchmark Sensex.

In its first earnings release post shares listing, LIC posted a 17% decline in consolidated net profit to 2,409 crore for Q4 from 2,917 crore in the same quarter a year ago. The total income of the insurer increased to 2,12,230 crore, from 1,90,098 crore in the same period of the previous fiscal year. LIC's net premium income rose to 1.44 trillion from 1.22 trillion year-on-year (YoY).

Brokerage Emkay in a note this week said it has initiated coverage on LIC shares with a neutral rating and a target price of 875. “While we appreciate LIC’s market-leading position and comfortable valuations, we prefer private sector peers that have better growth, profitability and therefore higher RoEV prospects," the note stated.

“Our TP ignores the minor contributions to EV growth from future VNBs as the overall EV returns are going to be lower and a mature life insurance company like LIC, with a large back-book and limited new business strain, should be valued closer to EV," analyts at Emkay said.

Furthermore, the unwinding rate for LIC’s EV could be higher vis-à-vis private peers, because of the large equity investments backing non-par liabilities; this is bound to result in higher volatility in EV, potentially feeding into the share price, the brokerage added.

Earlier this month, the government raised 20,557 crore by diluting its 3.5 per cent stake in the LIC through the initial public offering (IPO), the country's biggest ever.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.

 

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