Prior to the LIC listing, Macquarie initiated a hedge on the stock with a "neutral" rating. The foreign brokerage has suggested a target for LIC of Rs 1,000, suggesting a modest 5.37% upside from the issue price of Rs 949. The brokerage said that any investor who is exposed to LIC is indirectly exposed to the stock markets. and the inherent volatility that comes with it.
Macquarie said LIC's market share had shrunk due to a lack of a diversified product portfolio, adding that the life insurer was too focused on single premiums and group business. As a reminder, the same brokerage had published a report prior to the listing of One 97 Communications (Paytm) last year. At the time, Paytm was the largest IPO of all time. Macquarie had given Paytm an "underperforming" rating and suggested a target of Rs1,200, 44% below the issue price of Rs2,150.
“EV volatility concerns us because so much of it is MTM earnings on shares,” Macquarie said. The brokerage noted that scaling the peerless ledger is a challenge and said its assumptions are already aggressive. That said, Macquarie said that LIC's branding and distribution franchise is unparalleled. Following its recent reorganization, the company is expected to increase its share of non-participating pure protection products, which currently represent only 5-6% of its overall portfolio, he noted.
“However, the ability to sell high-margin non-participating products, as opposed to participating products that provide policyholders with a significant portion of policyholder surplus, will require a shift in organizational mindset and its agency strength, which could be LIC biggest challenge,” Macquarie said.
We use necessary and (optional) analytics cookies on our websites to analyze traffic and personalize content.
do not want us to use optional cookies. We will set a cookie on your device to remember and honor your preference.1