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Bajaj Finance and Adani Transmission drive LIC out of 10 most valued companies league

Bajaj Finance and Adani Transmission have replaced LIC on the list of top 10 most valued firms with a market cap of Rs 4.4 trillion each

August 30, 2022 / 10:06 AM IST
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Life Insurance Corp Of India lost its spot on the list of India's 10 most valued companies by market capitalisation to Bajaj Finance and Adani Transmission which have replaced LIC with a market cap of Rs 4.4 trillion each.

At 9.30 am, LIC was trading at Rs 674 on BSE, up 0.6% from its previous close, with the market cap at Rs 4.26 lakh crore.

Shares of the insurer have fallen 30 percent from issue price of Rs 949, eroding Rs 1.75 lakh crore of value.

The nation's largest insurer which manages assets in excess of Rs 41 lakh crore had launched a Rs 20,500 crore initial public offering in early May before listing on 17 May.

LIC now ranks eleventh. The top 10 most valued firms of India now are Reliance Industries, Tata Consultancy Services, HDFC Bank, Infosys, Hindustan Unilever, ICICI Bank, State Bank of India, HDFC, Bajaj Finance, and Adani Transmission.

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Recently, LIC reported a multi-fold surge in its June quarter net profit to Rs 683 crore from Rs 3 crore a year ago. But on a sequential basis, net profit was down from Rs 2,371.5 crore logged in the March quarter. On a call after earnings, the insurer said that volatility in its profit would be low.

Its value of new business dropped more than 80 percent sequentially to Rs 1,861 crore from Rs 9,920 crore in the March quarter. On an annualised premium equivalent basis, LIC's total business was Rs 10,270 crore of which the share of the individual segment was 62.8 percent. The life insurer sold 59 percent more policies in the June quarter compared with a year ago.

"LIC has all the levers in place to maintain its industry-leading position and ramp up growth in the highly profitable product segments (mainly protection, non-PAR, and savings annuity). However, changing gears for such a vast organisation requires a superior and a well-thought-out execution. We expect LIC to deliver 13% compound annual growth in APE during FY22-24, while VNB margin is likely to improve to 14.6 percent. However, we estimate operating RoEV to remain a modest 12.4 percent on  lower margin profile than its private peers. LIC’s valuation, at 0.7x FY24 EV, appears reasonable, considering the gradual recovery in margin and diversification in the business mix," said Motilal Oswal Securities in its latest report.

LIC is India’s largest life insurer with 63 percent of total new business premium in an under-penetrated market.

Prior to its initial public offering, LIC’s operations were largely focused on par policies that allow for consistent cash flows. Amendments to the LIC Act before listing resulted in separation of par and non-par funds with a revised surplus distribution policy in favour of the shareholder (95:5 to 90:10 by FY25). Furthermore, LIC is working on diversifying its product mix to the margin accretive non-par segment.

"We believe the market views LIC as an equity market proxy and recent weakness in markets is overdone. The investor concern that there would be significant change in methodology/re-evaluation of assets was dispelled with LIC’s first EV report after listing. We expect the Street to gain confidence with consistency in EV reports going ahead," said JPMorgan in its report.  The brokerage is overweight on the stock and has kept its target price at Rs 860 a share
Ravindra Sonavane
first published: Aug 30, 2022 09:53 am
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