LIC shares extend losses for second straight day, drop more than 10% in a week

Shares of Life Insurance Corporation of India (LIC) dropped 2.5% to reach an intraday low of ₹902.5 apiece on the NSE on Monday extending the loss for second straight day. The stock of the insurance behemoth has fallen by over 23% from its all-time peak of ₹1,175, touched last month on February 9.

LIC shares faced selling pressure following the government's recent announcement of a significant hike in salaries for employees and pensioners of the insurance giant. On Friday, the Centre approved a 17% hike in wages for more than 1.1 lakh employees of LIC. The salary hike for employees will be effective from August 1, 2022.

On Monday, LIC shares opened at ₹916.5 and swung between a high of ₹934 and a low of ₹902.5 apiece on NSE. The stock closed in red in the last five of the six sessions since March 11.

The stock has dropped 10.62% in the last week and 13% in the past one month. LIC shares, however, have advanced over 6% so far in 2024 and nearly 43% during the last one year. The stock had its 52-week low of ₹530 apiece on March 29, 2023.

The salary hike for LIC employees is expected to impact the company's profitability, according to experts. The decision will have an estimated annual outflow of over ₹4,000 crore. Once the increments are implemented, LIC's annual wage bill is projected to surpass ₹29,000 crore.

However, in the current financial year, inclusive of arrears, the total payout for LIC will be over ₹7,000 crore, taking the total wage bill to ₹32,000 crore in FY24.

LIC employees will receive arrears for two years. In addition, the Centre has raised the contribution to the National Pension System (NPS) for LIC employees from 10% to 14%. This government decision will benefit 24,000 employees who joined LIC after April 1, 2010.

Shares of LIC closed 2.24% lower at ₹904.4 apiece on NSE.