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LIC faces valuation hurdle despite OFS and stronger Q1 metrics
The government plans to sell 6.5% of LIC for ₹383 per share, and LIC’s VNB margin expanded 750 basis points year over year to 22.9% in Q1FY27.
Life Insurance Corp. of India (LIC) drew attention after the government announced an offer for sale, following LIC’s June quarter results. The OFS announced after market hours targets a 6.5% stake at ₹383 per share, about 11% below the prior day’s closing price, LiveMint Markets reported.
In its Q1FY27 update, LIC showed a sharp improvement in economic profitability, with VNB margin rising 750 basis points year over year to 22.9%. While APE growth was softer at 8% to ₹13,692 crore, VNB growth accelerated as APE mix shifted toward more profitable insurance business, including a 59% year-over-year rise in APE from non-participating individual saving policies.
The report also said LIC’s ULIP segment declined 17% year over year as those policies lost popularity amid a dull equity market. During the earnings call, LIC management expressed confidence about pushing VNB margin further into the mid-20s, supported mainly by product mix improvements, according to LiveMint Markets.
Even with the stronger operating metrics and the positive read-through from a successful OFS, the article highlighted valuation concerns. Emkay Global Financial Services estimates LIC trades at a price-to-VNB multiple of 28 on FY27 financials, versus HDFC Life’s multiple of 25, a gap of about 15%, and Emkay expects VNB growth of 10% for FY28 and 9.1% for FY29.