Home NewsStock Market News LIC shares: Macquarie initiates coverage on LIC with ‘neutral’ rating; sets target at Rs 1,000

LIC shares: Macquarie initiates coverage on LIC with ‘neutral’ rating; sets target at Rs 1,000

by WOOWinvest
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LIC shares: Macquarie initiates coverage on LIC with 'neutral' rating; sets target at Rs 1,000


NEW DELHI: Ahead of LIC listing, Macquarie has initiated coverage on the stock with a ‘neutral’ rating.

The foreign brokerage has suggested a target for

at Rs 1,000, which hints at a modest 5.37 per cent upside over the issue price of Rs 949.

The brokerage said any investor, who is taking exposure to LIC, is indirectly taking exposure to equity markets and the inherent volatility that comes with it.

Macquarie said LIC’s market share has fallen due to a lack of diversified product portfolio, adding that the life insurance company has an excessive focus on single premium and group business.

To recall, the same brokerage had come out with a report ahead of One 97 Communications (Paytm) listing last year. At that time,

was the biggest IPO ever. Macquarie had assigned Paytm with an ‘underperform’ rating and suggested a target of Rs 1,200, which was 44 per cent lower than the issue price of Rs 2,150.

“Volatility in embedded value (EV) worries us as a large part is constituted by equity MTM gains,” Macquarie said. The brokerage noted that scaling up non-par book is a challenge and said its assumptions are already aggressive.

That said, Macquarie said LIC’s brand and distribution franchise is unparalleled. Following its recent reorganisation, the company is set to increase its share of non-participating pure protection products, which currently form just 5-6 per cent of its overall portfolio, it noted .

“However, the ability to sell high-margin non-par products, as opposed to par products that provide policyholders a significant share of policyholder’s surplus, will require a change in the mindset of the organisation and its agency force, which could be LIC’s biggest challenge,” Macquarie said.

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