LIC lifts stake in two large caps and one mid-cap stock. Find out more

Life Insurance Corporation (LIC) of India, which made a disastrous debut on the stock markets last month and has fallen further since then, seems to be on the prowl, looking for sweet pickings in a volatile, bearish market.

The insurance behemoth has upped its stakes in FMCG major Hindustan Unilever Ltd, motorcycle maker Hero MotoCorp and non-banking finance company Capri Global Capital, via open market transactions.

Hero MotoCorp

LIC’s shareholding in Hero MotoCorp has increased from 1.83 crore to about 2.25 crore equity shares, or from 9.163% to 11.256% of the paid-up capital of the company, the insurer said in a regulatory filing.

LIC said it bought Hero Moto’s shares at an average cost of Rs 3,050.14 apiece between April 1, 2021 and June 13, 2022. Shares of the large-cap company were trading around Rs 2,607 on Wednesday.

Hindustan Unilever

In a separate filing, LIC said its shareholding in HUL has increased from about 11.74 crore to 11.77 crore equity shares. This translates into a 5.008% stake in the company, compared with 4.995% before.

LIC said it bought HUL’s shares at an average cost of Rs 2,206.93. Shares of HUL, which is part of the Sensex and Nifty indices, were trading around Rs 2,144 on Wednesday.

Capri Global

LIC’s shareholding in Capri Global Capital has increased from 88.58 lakh equity shares to 1.24 crore shares, or from 5.043% to 7.059%.

The holding increased during the period from February 21 to June 10, through open market purchases at an average cost of Rs 624.61, LIC said. Shares of Capri Global were trading around Rs 694 on Wednesday, giving it a market cap of Rs 12,190 crore.

What does Capri Global do?

Capri Global is an NBFC with presence across different segments like MSME, construction finance, affordable housing and indirect retail lending segments.

What could be the rationale behind LIC raising stakes in these three companies?

LIC is one of the biggest operators in the Indian stock market. It obviously sees a significant uptick in the fortunes, and consequently of the share prices of these companies, for it to raise its stakes in them.

Moreover, following the recent market crash, these three companies look evenly valued, with good long-term prospects. However, LIC bought most shares in these companies when they were trading higher than current levels. In fact, LIC is already sitting on paper losses on its additional investment in Hero and HUL.

Could a future rise in the price of these counters have a positive bearing on LIC’s own share price?

Indeed, much like other insurance companies, LIC too has been negatively impacted by the volatile market, which has crashed in recent weeks. If the counters of these companies see a major uptick in the foreseeable future, LIC would itself stand to benefit from the investments.

However, these three companies form a small part of LIC’s overall portfolio. So, the performance of only these three companies is unlikely to move the needle much for LIC’s own share price.

How did LIC’s counter fare on Wednesday?

After weeks of losing ground, LIC was finally up on Wednesday, trading at Rs 692 per share, up 2.7% from Tuesday’s close. It is, however, still 27% down from its issue price of Rs 949 per share, almost a month back.

Indeed, LIC itself has been a disastrous pick for its investors, including the anchor investors in its IPO who can now offload their shares into the open market after their lock-in period expired.