Gautam Adani-Hindenburg saga: Is it worth buying LIC shares after Q3 results?

Adani-Hindenburg saga: After the Hindenburg Research report putting 88 questions from Gautam Adani-backed Adani group companies, State Bank of India (SBI) and Life Insurance Corporation (LIC) of India are under scanner as they have exposure in Adani group companies. While SBI shares remain volatile after the Hindenburg Research report, LIC shares witnessed heavy sell off after the outbreak of this row and it slipped from 702 to ₹582 apiece levels in last 12 sessions, logging around 17 per cent dip in this time. However, SBI has already made it clear that it has just 0.88 per cent of its total loan book in Adani group companies.

Like SBI, LIC also declared that it is sitting with big profit on its investment of around ₹30,000 crore in the company. In fact, LIC has reported strong Q3 results also. However, for a bottom finisher, who believes in long term investment, LIC shares can be a luring stock as it has recently made its 52-week low and after making its low, it has witnessed buying interest as well.

According to stock market experts, margins of LIC have remained stable and LIC is transferring surplus in the non-par account to shareholders’ account every quarter. They said that LIC shares made a good demand zone in ₹580 to ₹585 and bounced back from there. Currently, LIC share price is facing hurdle at ₹670 to ₹680 levels and it can become highly bullish once it sustains above ₹680 apiece levels. Experts believe that after closing above ₹680 apiece levels, LIC shares may go up to ₹800 per share levels in long term.

Speaking on LIC exposure in Adani group companies, Avinash Gorakshkar, Head of Research at Profitmart Securities said, “LIC’s exposure in Adani group companies is around ₹30,000 crore whereas it has in hand cash to the tune of ₹26,000 crore. If we add the unclaimed cash into our account, which is around ₹21,000 crore, then net cash in hand of LIC is more than ₹45,000 crore. So, LIC is in total capacity to handle the investment it has in Adani stocks. However, the entire investment won’t become zero.”

Speaking on LIC share price outlook, Anuj Gupta, Vice President — Research at IIFL Securities said, “LIC has reported multi fold increase in consolidated net profit to 8334 crore as growth in premium income increased. It’d premium income improved by 14.5% from ₹97620 crore in Q3FY22. So, fundamentals of the company is sound position as its margins are also maintained.”

Technically it is showing V shape recovery from it’s recent low of ₹582.35 levels. We are expecting it may move higher from here and may test ₹670 to ₹680 levels very soon. If it breached ₹680 levels then it may move higher flto test ₹750 and ₹800 levels,” said Anuj Gupta of IIFL Securities.

Highlighting the takeaways from LIC Q3 results 2023, Avinash Singh, Senior Research Analyst at Emkay Global Financial Services said, “LIC’s Q3FY23 APE growth stood at 7.4% YoY (Retail: 0% YoY; Group: 32% YoY), leading to a sharp moderation in 9MFY23 APE growth to 25.5% YoY from 36.7% YoY in H1FY23. The slowdown reflects the continued market share loss in the retail segment. VNB margin for 9MFY23 at 14.6% was flat vs. that in H1FY23. Q3FY23 PAT was strong at ~Rs63bn, largely led by the accounting policy change adopted from FY23, where LIC is transferring surplus in the non-par account to shareholders’ account every quarter.”

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