LIC share price: LIC plans dividends and bonus issues to revive struggling stocks: report

Life Insurance Corp of India () plans to shift nearly $22 billion from policyholders’ funds to a fund to pay dividends or issue free shares, two sources said on Friday, as the country’s largest insurer aims to consolidate both its own network, the value and the confidence of investors.

The state-owned insurer went public in India in May, but its stock has since fallen more than 35%, wiping nearly 2.23 trillion Indian rupees of investors’ wealth.

LIC is now considering taking steps to revive its share price, said a government official, who did not wish to be named.

The company plans to transfer 1.8 trillion Indian rupees ($21.83 billion), a sixth of the 11.57 trillion rupees in its non-participating fund, to its shareholders’ fund, according to an official briefed of the case.

Life insurance companies mainly sell two types of products: the first are “participating policies” where profits are shared with customers and the second are “non-participating” or “non-participating” policies that have returns fixed. LIC places the premium it receives from the latter in a non-participating fund.

Transferring some of that money into the shareholders’ fund is a way to boost investor confidence, as it would be an indicator of higher dividend payouts in the future, the two officials said.

Surplus from the non-participating fund is intended for shareholders and can be transferred to the shareholders’ fund with the approval of LIC’s board of directors, which has not yet been sought, they said.

The transfer, if completed, would increase LIC’s net worth by around 18 times from its current worth of around Rs 105 billion and top the net worth chart among insurers including SBI Life and HDFC Life, the two officials said.

The LIC and the Ministry of Finance did not immediately respond to emails from Reuters seeking comment.

A larger shareholders’ fund would attract the attention of new and existing investors as the amount would be used by LIC to transfer dividends or issue free shares in the future, said Harvinder Singh, partner at law firm DSK Legal.

LIC shares were priced at 949 coins when listed, but are currently trading below 600 rupees.

According to data from Refinitiv, seven of the nine brokerages covering the stock have a “buy” or “strong buy” rating, with a median price target of 840 rupees.

“This move would increase book value per share and may help improve sentiment around LIC shares, but may limit the upside,” said Ankur Wahal, senior vice president of BOB Capital Markets.

Karen J. Nelson