Investors in LICs are said to be once bitten, twice shy. The finance ministry is engaged in scheduling roadshows overseas to woo global investment club as India’s life insurance behemoth struggles to earn back offering price, with shares losing more than a third of their value compared to the INR 949. The upgradation is aimed at improving LIC’s market performance.

The insurance company is falling market share to the private sector. Its investments in companies like Adani Enterprises have been marred by controversy, and more crucially, its embedded value growth has slowed to 9.8%. The private sector has a blown-up rate of 16.3% (HDFC Life), 14.4% (ICICI Pru), and 19.8% (SBI Life).

The stock is now selling at 0.5x its inherent value, a 75% discount to its rivals. The government, on the other hand, wants the world to believe that insurance company is a classic value stock, similar to SBI in the past. Furthermore, the company’s profits have increased fivefold this year.

Is LIC a suitable investment for those looking to participate in the country’s growth?

India is now the fastest-growing economy in terms of GDP, and insurance plays a major role. The overall premium-to-GDP ratio in India is 4.2%. A similar figure is 11.7% in the United States and 11.1% in the United Kingdom. The industry is competitive, and the insurance company controls 60% of the market.

Reaching out to potential investors through roadshows is a wise option. Former managing director and CEO of Star Union Dai-ichi Life and former executive director of Life Insurance Corporation of India, Kamalji Sahay, believes that investor awareness programmes should be developed in both the local and international markets.

Life Insurance Corporation of India, according to Sahay, has traditionally been a quiet organisation. He adds that the decline in the NAV of its listed shares is directly related to a lack of understanding in the investing public or institutions about the strengths of this especially rich and well-managed firm.

Beginning on June 23, Life Insurance Corporation of India will host international roadshows in Hong Kong, Singapore, and the United Kingdom. In the first leg, one was earlier done in the United States.

According to reports, the purpose of these roadshows is to raise understanding in global investors following the listing of Insurance Company shares.

Life Insurance Corporation of India has been listed on stock markets for a little more than a year. The non-deal roadshows will provide investors with an in-depth look at the company’s story. It even looks out to improve communication between the management team and investors.

The government raised INR 20,557 crore last year by diluting its 3.5% holding in LIC through an IPO.

On May 17, 2022, LIC shares were listed on the BSE at a discount of 8.62% to the offering price of INR 949 at INR 867.20 per share. The stock is now down roughly 40% from its offering price, bringing the entire market value decline to around INR 2.5 lakh crore. The offering cost range was INR 902 – INR 949. On May 12, 2022, investors received shares at the top of the cost range.

However, LIC faces problems. June was not kind to LIC. Its retail APE fell 1.4% in May, culminating in a 2.8% loss for FY24 to date. However, the private sector noted retail APE growth of 10.4% in May, following a dip in April, resulting in a 5.1% increase for FY24 thus far.

It comes at a time when the sector has seen a prominent surge in group APE of 18% year on year for May, attributable primarily to deceleration in GTI pricing and a slowdown in the group fund management business.

Because of the drop in group APE, the industry’s total APE fell by 2.6% in May. LIC’s APE fell by 7.4%, compared to a 1.2% spike in its 23 private-sector counterparts.

Macquarie has downgraded HDFC Life, ICICI Prudential Life, and SBI Life from outperform to neutral.

They lowered their FY25E VNB projections by 2%-6% and their target price by 15%-17%. They now predict a reduced value of new business (VNB) CAGR of 9%-15% for FY23-26E, compared to 16%-22% for FY22-25E. There are no near-term catalysts. Unless and until GDP grows, sector performance will lag. It said that valuation support suggests a limited downside. This development will almost legit help investors rekindle their interest in LIC.

Whatever the scenario may be, LIC maintains its own strength.

LIC is a major corporation with holdings in several publicly traded companies. It is a very grand affair for them to make roadshows abroad because it not only talks about LIC and its success but also about India Inc, says Arun Kejriwal, founder of Kejriwal Research & Investment Services.

The investment cannot be better than the portfolio of equities in which LIC has invested. He feels that remarketing LIC will benefit both the firm and the Indian stock market.

Throughout the period, the top brass of the Corporation, together with a few senior officials from the finance ministry, have spoken with a slew of global investors. The non-deal roadshows are intended to display LIC’s strength and encourage investors to invest in the company’s shares.

LIC reported a more than five-fold increase in consolidated net profit to INR 13,191 crore for the fourth quarter ending March 2023, compared to INR 2,409 crore in 2022. LIC’s net profit more than tripled to INR 35,997 crore in FY23, up from INR 4,125 crore from 2022.

For the accounting year ending March 31, 2023, BODs of LIC has proposed a final dividend of INR3/equity share with a face value of INR10 each.

LIC is trying a variety of different steps to enhance its balance sheet. For example, its affiliate, LICMF, will purchase all of IDBI Mutual Fund’s programmes. All of IDBIMF’s programmes will be managed, operated, and administered by LICMF. Ten of the IDBI Mutual Fund’s 20 plans will be combined with LIC MF schemes. LICMF’s AUM is now INR 19,700 crore, whereas IDBI Mutual Fund manages assets at INR 3,800 crore.

Because the firm is expected to decrease its ownership further, LIC has begun the process of approaching possible overseas investors early this year. Analysts believe that the level of dilution will remain the same at 3.5%, notwithstanding the lack of formal notice.

When LIC went public last year, they were not entirely prepared, and the scene was chaotic. According to Deven Choksey, founder and promoter of KRChoksey Holdings, this is why investors have been lukewarm.

Given the scale of LICs, it would need extremely big investors like sovereign, insurance, and pension funds. The firm has begun the process in order to educate investors about the Corporation and its potential. Second, investors may be looking for stability, according to Choksey.

When asked how to increase share price, Choksey replies it must happen on two fronts: performance and perception. The Corporation’s performance has been significantly superior to previous years. Similarly, perception needs to improve also.

He feels that the ongoing roadshow will help to develop perception. Choksey explains that performance and perception are two sides of the same coin.

However, DIPAM secretary Tuhin Kanta Pandey stated earlier last month that the government is not in a rush to implement a follow-up public auction for LIC.

Firms, particularly major ones, do roadshows on a regular basis. According to Pranav Haldea, managing director of Prime Database, it is vital for organisations to explain how they have performed, whether good or poor and what their future goals are with existing shareholders and new investors.

Markets usually value future potential more than earlier achievements. While LIC has a strong market share, the issue is more about how it is decreasing, he says.

Life Insurance Corporation of India, on the other hand, has been developing a multi-pronged plan to increase its performance. First, it is trying to grow its reliance on non-participating insurance policies in which it isn’t required to give dividend benefits or payouts dependent on the company’s performance in any given year. This will eventually assist the organisation in increasing its future profitability.

Over 94% of policies are now participative. In comparison, the part of participating policies in its private sector listed counterparts like HDFC Life, ICICI Prudential, and Bajaj Finserv is only between 5% and 20%.

The LIC has effectively emerged from the scandal. Except for its investment in Adani Enterprises, of which it owns approximately 4%, Life Insurance Corporation of India has benefited from all other Adani enterprises.

The recent climb in the Adani Group firm share price has come as a big comfort to Life Insurance Corporation of India, as the market value of its investment has increased dramatically.

Conclusion.

Starting on June 23, LIC is launching global roadshows in Hong Kong, Singapore, the United Kingdom, and other countries to raise understanding among investors globally after the listing of shares. The stock is today worth less than one-third of its issue price of INR 949. The non-deal roadshows will provide investors with an in-depth look at the company’s story.