LIC shares jump 4%. Here’s what's fueling the rally

Shares of Life Insurance Corporation of India (LIC) rallied 4.1% to Rs 617.1 in Monday’s intraday trade on BSE after the reports said the company is planning to transfer nearly $22 billion from policyholders' funds into a fund earmarked to pay dividends or issue bonus shares.

The company plans to transfer Rs 1.8 trillion ($21.83 billion), a sixth of the Rs 11.57 trillion lying in its non-participating fund, to its shareholders' fund, Reuters reported.

Transferring some of that into the shareholders' fund is one way to shore up investor confidence as it would be an indicator of higher dividend payouts in the future, it added.

The surplus in the non-participating fund is earmarked for shareholders and can be transferred to the shareholder's fund with approval from LIC's board, which is yet to be sought, Reuters reported.

The transfer, if concluded, would boost LIC's net worth by about 18 times its current value of about Rs 105 billion and top the net worth chart among insurers, including SBI Life and HDFC Life, it added.

As per Trendlyne data, the highest target for stock goes up to Rs 1,000, while the average estimate of Rs 853.9 shows an upside of the potential of around 44.1% from current prices.

Out of the nine analysts covering the stock, 6 have strong buy ratings, while one has a buy and the other two have a hold rating.

At 11.25 am, the scrip was trading 2.77% higher at Rs 609.35 over its last day’s closing price of Rs 592.95. The stock has fallen nearly 10% in the last three months, while it has plunged more than 30% since the state-owned insurer listed on the Indian stock exchanges in May.

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