LIC may continue trading at substantial discount: Nuvama Institutional Equities' Madhukar Ladha

Madhukar Ladha, Director at Nuvama Institutional Equities on Monday said that LIC's future prospects may be hindered by several factors, including the potential for trading at a substantial discount and the growing dominance of private players in the insurance industry. According to Ladha, there is a prevailing sentiment that LIC's shares will continue to trade at a substantial discount.

This means that the market value of LIC's equity may be lower than expected, potentially affecting investor confidence. The reasons behind this discounted valuation are multifaceted, but one significant factor is the sizeable equity book that forms a large part of LIC's overall valuation.

“Growth for them has been more subdued. So, the private sector life insurance companies have been growing at a much faster rate and LIC is not able to. So it is losing market share as well," he told in an interview with CNBC-TV18.

Investors are likely to be cautious, as LIC's equity growth has been more subdued compared to the rapid expansion seen by private players.

“We passively track LIC. It is a good, strong, large, solid business but in my opinion, a large part of the valuation comes from equity book and the insurance business is much lower in the entire scheme of things for LIC,” he said.

Ladha highlighted the notable growth disparity between LIC and private players in the insurance sector. While LIC, as a state-owned entity, has a vast market presence and a longstanding reputation, it has faced challenges in sustaining the same growth rate as its private counterparts.

The emergence of private players with innovative product offerings, efficient distribution networks, and customer-centric approaches has enabled them to capture a larger market share. This accelerated growth has put LIC in a position where it must adapt to the changing dynamics of the industry to maintain its competitive edge.

To thrive in the evolving landscape, Ladha believes LIC needs to streamline its operations, enhance customer experience and foster a culture of agility and adaptability.