Good News for LIC Shareholders! Company plans bonus shares, dividends to revitalise stocks

LIC is planning to transfer around $22 billion from policyholders' funds to a fund meant to pay dividends or bonus shares.

Shares of Life Insurance Corporation of India (LIC) have dipped around over 35 per cent in the six months and the investors are not much keen to invest in the stock. However, to revive the battered stock that listed for Rs 949 a piece after its IPO, the company is planning to issue bonus shares and dividends of about Rs 1.8 lakh crore to the shareholders, according to Reuters.  

With this, the company wants to regain the confidence of investors. On Friday, LIC shares fell to Rs 593 apiece. The stock got listed on the exchanges in May 2022. Since the listing, its price has fallen by around 35 per cent and investors lost around Rs 2.23 lakh crore.

According to the report, LIC is planning to transfer around $22 billion from policyholders' funds to a fund meant to pay dividends or bonus shares.

The 1.8 trillion Indian rupees (around $22 billion) fund is one-sixth of the 11.57 trillion rupees LIC has in its non-participating fund. Generally, life insurance firms sell two types of products - participating and non-participating. In the participating policies, profits are shared with customers and in the non-participating policies, a fixed return is given to the subscribers. 

However, the LIC is yet to take its board's approval for the same. If the LIC gets the approval and the fund transfer takes place, it will boost LIC's net worth by about 18 times.

Meanwhile, the Ministry of Finance has advised LIC to tweak/modernise its product portfolio to boost profitability, reported the Financial Express. This will further help the company ensure better returns to investors.

LIC’s net profit jumped to Rs 682.88 crore in the June quarter from Rs 2.94 crore a year ago.