LIC rallies 5% to 52-week high after minimum shareholding rule tweak lifts overhang

Earlier this year, the government had amended the regulation so that listed state-run companies, including banks, will not need to comply with the rule requiring an MPS of 25 percent even after their privatisation, if the government decides so “in public interest”

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LIC shares zoomed over 5 percent to hit a 52-week high on December 22 after the government granted a one-time exemption to the insurer to achieve 25 percent minimum public shareholding (MPS) within 10 years.

This removes a key overhang from the stock because its earlier deadline to achieve MPS was May 2027, as per the Sebi regulation, which would have meant share sales by the government. The government holds 96.5 percent in LIC.

At 10:10am, the LIC shares were quoting at Rs 803.50 on the NSE, after hitting a 52-week high of Rs 821 earlier in the session. The stock is down 15 percent from its IPO price of Rs 949 in 2022.

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Earlier this year, the government had amended the regulation so that listed state-run companies, including banks, will not need to comply with the rule requiring an MPS of 25 percent even after their privatisation, if the government decides so “in public interest”.

“Let me make it very clear that we are in no hurry to bring in any kind of FPO on the LIC front. There is a broader understanding about the strengths of LIC among a wider set of investors. I think the LIC management is making a sincere effort in that direction to engage with the analysts, to engage with investors,” DIPAM Secretary Tuhin Kanta Pandey had said in an earlier interview with CNBC-TV18.

Also Read: LIC as an investor is key to its profitability as an insurer

LIC recently unveiled a non-linked, non-participating whole-life insurance product called Jeevan Utsav that offers income benefits of 10 percent of the sum assured. The minimum sum assured under this limited premium payment policy is Rs 5 lakh.

For the quarter ended September 2023, LIC’s net profit fell 50 percent on-year to Rs 7,925 crore. The profit was reportedly hurt by a fall in premium income. Also, it transferred a lower amount of money to its shareholders’ fund.

According to analysts, LIC has levers in place to ramp up growth in the highly profitable product segments. However, changing gears for such a vast organisation requires time, they said. Moreover, higher commissions for agents continues to be a drag on margins.