Shares of Life Insurance Corporation of India (LIC) fell 2.5% to hit a day's low of ₹902.50 on Monday, March 18, after witnessing selling pressure for the fifth consecutive session. The scrip opened at ₹916.50 and plunged 1.5%. In the last fivesessions, the insurance player's stock has tanked about 10%.
The stock of India's largest insurer fell on plans to raise wages by around 17% for its 1.10 lakh employees. The hike is set to substantially impact LIC, with an estimated annual implication of over ₹4,000 crore. Once the increments are implemented, LIC's annual wage bill will swell to over ₹29,000 crore.
In the current financial year, however, inclusive of arrears, the financial implications for the corporation will be higher at ₹7,000 crore—taking FY24's total wage bill to ₹32,000 crore.
The National Pension System (NPS) contribution is enhanced from 10% to 14% for nearly 24,000 employees who joined after April 1, 2010, the state-run insurer said. Additionally, a one-time ex-gratia payment to LIC pensioners was also made to more than 30,000 pensioners and family pensioners, it said.
With today's losses, the stock is trading 22% below its all-time high level of ₹1,175, hit on February 9, 2024.
India's largest insurer has seen shares rise 6% so far in 2024 and nearly 60% during the last one year. The stock has also risen 76% from its 52-week low of ₹530.
The stock crossed its listing day price of ₹904 for the first time on January 17, 2024. LIC shares jumped 12% in November 2023 and 22% in December 2023 after Chairman Siddhartha Mohanty told news agency PTI that he is optimistic about achieving double-digit growth in new business premiums in the financial year 2024.
LIC is also India's largest IPO where the government had divested 3.5% stake in the company for over ₹21,000 crore. Therefore, one must also note that the stock trades on very low float, as the government still owns the remaining 96.5% stake. As a result, any significant move on either side will be extreme.
Out of the 19 analysts tracking LIC, 12 have a 'Buy' recommendation on the stock, five say 'Hold', while two have a 'Sell' rating. JP Morgan has the highest price target for LIC at ₹1,340, followed by Kotak Securities and Axis Capital at ₹1,300 per share.
Shares of LIC are trading 1.68% lower at ₹909.65 during today's afternoon trade. The stock is trading 4% below its IPO price of ₹949.
