Is LIC Waiting For HDFC Bank Share Price To Fall Further Before It Buys?

Life Insurance Corporation of India (LIC) is reportedly not in a hurry to acquire additional HDFC Bank stock from the market.

What Happened: Despite regulatory approval allowing LIC to increase its ownership in the country’s most valued lender, caution prevails among investors, including LIC, Economic Times reported, citing sources.

HDFC Bank’s share price is currently trading at historically low valuations of around 2.1 times book value. While there is perceived value in HDFC Bank stock, the substantial cost associated with acquiring an additional 4.8% stake may influence LIC’s decision.

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After getting approval to raise its stake in the lender to a maximum permissible ownership of 9.99%, LIC can invest ₹52,000 crore at current market prices.

Why It Matters: The regulator has allowed LIC to acquire an additional 4.8% stake, with the possibility of raising it to the maximum by January 24, 2025. As of December 2023, LIC holds a 5.19% stake in HDFC Bank.

HDFC Bank’s shares have recently experienced a sharp decline after reporting a decrease in its core net interest margin due to a merger with its erstwhile parent HDFC. The bank reported a 2.65% increase in consolidated net profit for the October-December period.

LIC, which holds 4% of the market capitalisation in India, boasts an asset size of ₹47.5 lakh crore, with ₹11 lakh crore-₹12 lakh crore in equity value investments.

The market value of LIC’s holdings rose to ₹11.89 lakh crore until December 2023, indicating positive performance in various listed companies, including Coal India, Larsen & Toubro, Bajaj Auto, Tata Motors and NTPC.

Price Action: HDFC Bank’s share price was up 1.17% at ₹1,451.75 around noon on Monday.

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Posted In: EquitiesLarge CapNewsMarketsHDFC BankLife Insurance Corporation of India