LIC contributes big to dazzling rise in ITC stock

LIC contributes big to dazzling rise in ITC stock

Shares of ITC have been on the boil, and not surprisingly, the country’s largest institutional investor has significantly contributed to its meteoric rise in the past few months.

Data from Capitaline show the country’s largest investor, Life Insurance Corp of India (LIC), increased its exposure to ITC the most during the June quarter (Q1), in terms of market value. LIC’s investment in ITC jumped Rs 12,937 crore — the most in Q1 — to Rs 85,672 crore. L&T was second in the pecking order, and the insurer increased its investment by Rs 10,699 crore. Of course, Reliance Industries remains LIC’s crown jewel, with the latter’s total holding in the conglomerate at close to Rs 1 trillion. During the quarter, it saw fresh investments of Rs 7,191 crore.

It holds stakes in 185 companies in the NSE 500 universe, and has stake in 43 firms of the Nifty-50 bucket.

During Q1, the life insurance major sold stakes in 73 companies, and bought additional shares in 45 entities. Its holding remained unchanged in 67 firms compared to the March quarter.

“LIC seems to be focusing on blue-chip stocks for now, and is raising bets in the likes of RIL and ITC. The demerger of hotels business was expected and its other businesses have been doing well,” said Deepak Jasani, head of retail research at HDFC Securities.

In recent times, ITC’s commentary on the hotels business has also boosted the investor sentiment. “Post-demerger, ITC’s return on capital employed (RoCE) shall improve by 18-20%, and the return on invested capital by double digits,” ITC said in an analysts call, according to a report by Nuvama Institutional Equities. It added that the new entity’s focus would be on an ‘asset right’ model.

“L&T is generating a lot of interest, thanks to heavy spends on infra. While it underperformed up to two quarters ago, its order book has led it to outperform over the past few months, and prospects for the next few quarters look strong,” said independent market analyst Ambareesh Baliga.

Airtel, too, saw an additional investment of Rs 4,152 crore. Baliga pointed out that rising ARPUs (average revenue per user), and the management expectation of ARPU touching Rs 300 over the next 15 months have made it a strong bet.

On the other hand, two Adani Group firms were the major losers. LIC pared its holding in Adani Total Gas and Adani Transmission by Rs 1,411 crore and Rs 946 crore, respectively.

“LIC could have booked profits in Adani Group stocks that have recovered sharply from their lows, and may have preferred to limit its investment in those,” said Jasani.

As regards 43 Nifty stocks in which LIC has a holding, the market value of its investments surged by Rs 77,853 crore (11.07%) to Rs 7.81 trillion. For the remaining 142 non-Nifty stocks, its value rose by Rs 25,633 crore (9.95%) to Rs 2.83 trillion.

The Sensex and Nifty gained 9.71% and 10.54%, respectively, during the quarter, while LIC’s share price jumped 18.32%, from Rs 534.35 on March 31 to Rs 632.25 on June 30.