Is LIC stock undervalued? Kotak Equities suggests buying with Rs 1,175 target

Stating that the stock of Life Insurance Corporation of India (LIC) looks inexpensive, domestic brokerage firm Kotak Institutional Equities has maintained a ‘buy’ call on the stock, revising its target down to Rs 1,175 from an earlier Rs 1,250, to reflect a lower investment return following the recent correction in equities.

“The correction in equities and a severe slowdown in business, following the surrender value guidelines, continue to weigh on the prospects of LIC. Trends in (equity) markets have high sensitivity and drive over 50% of its EV. The slowdown in APE and management’s stance on dealing with the same are monitorable. Inexpensive valuations support our BUY rating,” said the domestic brokerage firm.

Kotak Equites also mentioned that there has been a sharp decline in LIC’s equity investment book and the business momentum has also been weak. However, they noted that the current valuations at 0.58X (trailing) September 2025E factor in these updates.


LIC’s equity investment book has declined by 6.9% since December 31, 2025, after a 5.3% fall in 3QFY25. On an FYTD basis, the overall equity investment book is up 2.2%.

“We estimated investment variance at Rs518 bn in 1HFY25; we now estimate a loss of Rs50 bn in 2HFY25E (we estimated a gain of Rs250 bn earlier), with lower unwind due to reduced expectation of excess real-world return over risk-free rates,” Kotak Equities report said.

On the business front, LIC reported a 24% year-on-year decline in APE in 3QFY25, following strong growth in 1HFY25. January and February saw declines of 11% and 21%, respectively, while March remains a crucial month with a high growth requirement.

The brokerage firm noted that to drive high-margin business, LIC has introduced multiple non-par products and a new pension product. The company also revised its commission structure, repriced products, and adjusted product designs to improve persistency after implementing surrender value guidelines.

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However, Kotak stated that unconfirmed media sources suggest backlash over the commission changes in October 2024, contributing to a slowdown. As a result, LIC’s APE estimates for FY2025 and FY2026 have been revised downward to a 5% and 6% decline, respectively. March 2025 is projected to see a 35% drop, followed by a 20% decline in 1HFY26 and a 10% recovery in 2HFY26.

The VNB margin estimate for FY2026 has also been lowered to 16.5% from 17.4% in FY2025, reflecting the impact of surrender value guidelines.

Further, Kotak also noted the upcoming management changes in the company.

“We expect major senior management changes at LIC over the next few months (link and link to media articles). This includes superannuation of two MDs—M Jagannath and Tablesh Pandey in May—and end in term of Sidharth Mohanty, MD/CEO in June. The new management team will need to cut out a concrete strategy to deal with lower business volumes, if business remains weak till then,” the report said.

The shares of LIC were trading flat at Rs 7e43 on the BSE around 12:30 pm today.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)