LIC holds over 10% stake in these Nifty firms; should you invest?

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Life Insurance Corporation of India (LIC), which holds a stake in almost every company on Nifty, had more than 10% stake in at least seven bluechip firms in the index as of June 30. Data available with Ace Equity showed that the insurance behemoth held a 16.25% stake in the FMCG major ITC as of June 30. Shares of ITC have been buzzing on Dalal Street due to their underperformance against the benchmark equity indices. The scrip has declined 1.43% YTD to Rs 206 on July 29 against the 10% gain registered by the benchmark BSE Sensex during the same period.

Of late, the company reported a 30% growth in consolidated net profit at Rs 3,343 crore for the first quarter of the current financial year (Q1FY22). The cigarette-to-hotel conglomerate had posted a profit of Rs 2,567 crore in the same quarter last year.

Brokerage view

Brokerage Geojit Financial Services is positive on ITC with a price target of Rs 263. “Covid second wave played a spoilsport during Q1FY22 limiting growth. However, we expect performance to improve going forward on the back of demand growth,” the brokerage said.

Other top holdings

Engineering and construction major Larsen & Toubro is next on the list. LIC had a 13.25% stake in the company for the quarter ended June 30. Shares of the company have climbed 24% YTD. The company posted an over two-fold jump in consolidated profit after tax (PAT) to Rs 1,531.66 crore for the quarter ended June, helped by higher income.

Centrum Broking has an ‘Add’ rating on L&T with a target price of Rs 1,735. “L&T’s Q1FY22 earnings were below estimates due to lower execution, lower other income and higher credit costs in L&T Finance. PAT at Rs 1170 crore (+287% YoY on a low base) was below the estimate of Rs1530 crore. The rise in working capital level (up 60 basis points QoQ to 22.9%) is seasonal and led by payments to vendors. Execution levels continue to recover well after the 2nd wave impact in April and May,” the brokerage said.

LIC also had over 10% stake in Coal India, NTPC, ONGC, Adani Ports and Grasim Industries. Shares of these companies have advanced between 4%-67% since the beginning of the ongoing calendar year.

In the recent update, state-run power company NTPC said its arm NTPC Renewable Energy has floated a domestic tender to set up India’s first Green Hydrogen Fuelling Station in Leh, Ladakh. On the other hand, the despatch of coal by state-owned Coal India to the power sector registered an increase of 35.6% to 127.31 million tonnes in the first quarter of the ongoing fiscal. Adani Ports and Special Economic Zone has raised $750 million through issues of bonds, including a 20-year unsecured bond issue, from the global markets.