Top 5 Penny Stocks Held by LIC. Are They Worth a Look?

From the top investing gurus to institutional giants, each player leaves behind clues that can unlock lucrative opportunities.

While whispers of Dolly Khanna, Vijay Kedia and Ashish Kacholia's investment moves circle around daily, there's another formidable presence quietly influencing the market: The mighty Life Insurance Corporation of India (LIC).

LIC has emerged as a silent force over the years, discreetly navigating the market waters. The insurance major's strategic investment decisions have caught the attention of seasoned traders and investors alike.

For instance, the company was criticised in February this year after its value in Adani stocks dropped sharply. But in just a couple of months, LIC saw its value in Adani group stocks increase a lot, thanks to the stellar rally in these stocks.

As the stock market continues its up-move, there's a growing interest in exploring the potential of penny stocks, where the promise of exponential growth often lies.

So in the coming months, we plan to cover a new series highlighting penny stocks held by super investors like Rakesh Jhunjhunwala and big institutions like LIC.

Let's start with the penny stocks that are held by LIC.

#1 National Fertilizers

First on this list is a company coming off a good year by posting its highest ever net profit since inception.

National Fertilizers is engaged in the production and marketing of neem coated urea, bio-fertilisers (solid & liquid) and other allied industrial products. It's also engaged in trading of imported and domestic fertilisers, compost, seeds, and other agro products.

With a urea production capacity of over 3.6 MT, National Fertilizers is the second largest company in India in terms of urea capacity. It has a vast marketing network comprising dealers, cooperative societies, and institutional agencies.

Despite LIC's backing, the stock remained in a range over the years, maintaining its penny stock status.

As of June 2023, Life Insurance Corp (LIC) held 9.6% stake in the company. The promoters, i.e. the government, holds 74.7% and it also gets benefits of raising funds at very competitive rates.

In FY23, the company posted its best financial results as the net profit spiked on the back of a subsidy worth around Rs 7 bn. This was on account of the extension of the energy savings scheme.

Financial Snapshot

	FY19	FY20	FY21	FY22	FY23
Revenue	1,24,291.30	1,31,353.60	1,19,056.60	1,58,570.90	2,96,170.00
Growth (%)	39%	6%	-9%	33%	87%
Operating Profit	10,685.00	9,197.80	9,500.70	6,165.30	10,720.00
OPM (%)	9%	7%	8%	4%	4%
Net Profit	2,939.70	-1,810.60	2,370.80	-950.1	4,560.00
NPM (%)	2%	-1%	2%	-1%	2%
Dividend Per Share (Rs)	1.9	1	0	0	1.5
Debt to Equity (x)	2.9	4.3	0.9	1.6	1.4

Data Source: Ace Equity

According to the company's management, the performance is expected to improve in FY24, driven primarily by the profits in urea operations on account of lower energy consumption.

In the past one year, shares of the company have gained 36%.

#2 Bliss GVS Pharma

The company is engaged in manufacturing, marketing, trading and export of pharmaceutical formulations in the form of suppositories, pessaries, capsules, tablets, and syrups.

What separates Bliss GVS Pharma from its peers? Well, the company has developed a strong market position in the sub-Saharan Africa for its brands in the anti-malarial, dermatology, and anti-inflammatory segments. The company is a leader in manufacturing suppositories and pessaries dosage forms.

As of June 2023, LIC holds a 6.6% stake in the pharma company. Promoters of the company hold a 35.1% stake and they have been buying shares in the open market for past two quarters.

The company posted total sales of Rs 7.5 bn in FY23 as compared to Rs 7.45 bn in the year ago period. Operating profit too, came in at same level as last year at Rs 1.2 bn.

Financial Snapshot

	FY19	FY20	FY21	FY22	FY23
Revenue	8,985.70	6,893.10	5,772.10	7,474.50	7,515.90
Growth (%)	10%	-23%	-16%	29%	1%
Operating Profit	1,952.70	1,625.00	1,286.00	1,498.30	1,351.10
OPM (%)	22%	24%	22%	20%	18%
Net Profit	1,237.20	972.7	684.9	150.4	708.6
NPM (%)	14%	14%	12%	2%	9%
Dividend Per Share (Rs)	1	0.5	0.5	0.5	0.5
Debt to Equity (x)	0.2	0.2	0.2	0.1	0.1

Data Source: Ace Equity

As the majority of its revenue comes from international market, the performance of FY23 was subdued due to geopolitical changes. It derives maximum revenue from African countries.

In recent years, to reduce dependence on one country, Bliss GVS has set up a manufacturing facility at Palghar, Maharashtra, designed to cater to USA and EU market.

In the past one year, shares of the company have surged 15%.

#3 Vakrangee

Third on the list is Vakrangee, a technology-driven company centered around building last-mile retail outlets to deliver BFSI and other services to the unserved and underserved rural, semi-urban, and urban population of the country.

The company recently demerged after NCLT's approval for the scheme of arrangement. Its e-governance & IT/ITES business demerged into VL EGovernance & IT Solutions.

This demerger is set to unlock the potential of the core Vakrangee kendra and its digital app business.

As of June 2023, LIC holds 6.62% in Vakrangee. Foreign investors (FIIs) have been constantly dumping shares of Vakrangee. Their current holding is 4.11%, down over 3% from 7.7% in March 2023.

In FY23, the company's revenue and net profit dropped sharply as can be seen in the table below.

Financial Snapshot

	FY19	FY20	FY21	FY22	FY23
Revenue	15,082.30	6,852.20	3,142.90	7,786.90	1,970.00
Growth (%)	-77%	-55%	-54%	148%	-75%
Operating Profit	583	1,012.50	976.2	1,586.90	180
OPM (%)	4%	15%	31%	20%	9%
Net Profit	252.3	712.8	627.9	1,095.30	10
NPM (%)	2%	10%	20%	14%	1%
Dividend Per Share (Rs)	0.3	0.3	0.1	0.1	0
Debt to Equity (x)	0	0	0	0	0.8

Data Source: Ace Equity

The company recently posted its results for the first quarter ended June 2023. Net profit shot up compared to the year ago period. Revenue was higher both on a year on year as well as sequential basis.

In its concall, the company said that it recently launched a mobile super app-based business platform primarily targeting rural India. 'BharatEasy' app was made live and some of the services include online shopping, agriculture products, total healthcare services, online demat account opening, etc.

Vakrangee is currently focusing on expanding its network to 3,00,000 plus outlet thereby achieving US$1 bn of revenue and US$ 150 bn of gross transaction value.

In the past one year, shares of the company have fallen around 45%.

A word of caution. The stock of Vakrangee crashed in early 2018. The stock fell about 95%.

Those investors who sold quickly, without caring about the profit or loss in the stock, were vindicated. The others were left stuck as the stock price never recovered.

#4 GTL Infrastructure

GTL Infrastructure is in the business of providing shared passive telecom infrastructure in India.

The business model of infrastructure sharing enables telecom operators to convert their capex to a fixed and predictable operating expense, allowing them to divert their capital toward core activities.

The company's revenues come from long-term (5, 10, 15 years) contracts with telecom operators.

As of June 2023, LIC holds 3.33% stake in the company. LIC's holding in the company has come after the company's shares having gone through a rough patch. The company has reported a string of losses for more than five years while its resolution plan is still under work.

Financial Snapshot

	FY19	FY20	FY21	FY22	FY23
Revenue	15,002.10	14,169.40	14,096.80	14,627.30	14,300.00
Growth (%)	-36%	-6%	-1%	4%	-2%
Operating Profit	1,945.90	2,825.80	3,084.10	4,258.60	280
OPM (%)	13%	20%	22%	29%	2%
Net Profit	-15,394.00	-18,635.40	-12,707.70	-14,746.70	-18,170.00
NPM (%)	-103%	-132%	-90%	-101%	-127%
Dividend Per Share (Rs)	0	0	0	0	0
Debt to Equity (x)	2.9	-25.6	-3.4	-1.5	-0.8

Data Source: Ace Equity

Low promoter holding, pledging of shares, increasing losses, among other reasons have largely kept the company's shares under check.

GTL Infra is literally a penny stock that currently trades at less than Re 1. It has fallen quite a bit in the past one year.

The company is set to report its quarterly earnings on 9 August 2023.

To know more, check out GTL Infra's latest quarterly earnings report.

#5 Bajaj Hindusthan Sugar

Last on this list of penny stocks held by LIC is Bajaj Hindusthan Sugar. The company is engaged in the manufacture of sugar, alcohol, ethanol, and the generation of power.

A part of the Shishir Bajaj Group, Bajaj Hindusthan is the largest industrial alcohol manufacturer in India. With the ethanol blending trend catching up, Bajaj Hindusthan Sugar could be the ethanol penny stock you need to keep an eye on.

As of June 2023, LIC holds a 3.2% stake in the company. Promoters of the company hold a little under 25% while FIIs have shown some interest in the sugar company for the past few quarters.

Its promoter Kushagra Bajaj has pledged all his shares. If the optionally convertible debentures (OCDs) are converted into shares, the promoter will be left with just an 8.76% stake.

In FY23, the company's sales grew by 15% which resulted in narrowing losses to Rs 1.4 bn from Rs 2.7 bn in FY22. Bajaj Hindusthan Sugar recently posted its first quarter results. Sales fell around 11% while losses came in at Rs 746.9 m.

We don't know when LIC's love for this loss-making company will end.

Financial Snapshot

	FY19	FY20	FY21	FY22	FY23
Revenue	68,063.90	66,693.40	66,659.70	55,756.50	63,380.30
Growth (%)	16%	-2%	0%	-16%	14%
Operating Profit	3,920.70	4,649.20	1,855.20	2,033.20	2,851.60
OPM (%)	6%	7%	3%	4%	4%
Net Profit	-1,365.60	-499.9	-2,908.20	-2,675.40	-1,347.30
NPM (%)	-2%	-1%	-4%	-5%	-2%
Dividend Per Share (Rs)	0	0	0	0	0
Debt to Equity (x)	2.2	2	2.3	2.1	1

Data Source: Ace Equity

Earlier this year, it acquired two companies - Phenil Sugars and Bajaj Power Ventures - for Rs 8 bn.

Bajaj Hindusthan is also among the accounts shortlisted by lenders to sell to the government-backed aggregator National Asset Reconstruction company (NARCL).

It's undergoing a restructuring plan owing to the weak operational and financial performance which have resulted in the company not meeting its interest and debt obligations.

In the past one year, shares of the company have gained over 50%.

Other penny stocks in which LIC holds a substantial stake

Apart from these five, here are a few other penny stocks that have found favour with LIC.

Company Name	LIC Holding	Current Price (Rs)
Mahanagar Telephone Nigam Ltd.	13.25	20.48
Future Lifestyle Fashions Ltd.	7.02	5.58
Reliance Capital Ltd.	2.96	10.24
Jaykay Enterprises Ltd.	2.32	70.41
Omaxe Ltd.	2.29	46.78
PTC India Financial Services Ltd.	2.11	24.34
Southern Petro	2.07	66.06
Orient Green Power Ltd.	2.06	15.45
IFCI Ltd.	1.95	13.88
GMR Power and Urban Infra Ltd.	1.72	19.98
Aban Offshore Ltd.	1.71	40.06
Reliance Home Finance Ltd.	1.54	2.79
Gateway Distriparks Ltd.	1.48	78.43
Spencer's Retail Ltd.	1.47	63.2
PC Jeweller Ltd.	1.45	28.55

Data Source: Ace Equity

Conclusion

While these were just the penny stocks held by LIC, it has a huge portfolio spread across sectors with index heavyweights forming the biggest part. This helps it tide over market volatility.

It has more than 240 stocks with ownership above 1% in them while the total number of companies in its portfolio goes to over 350. The portfolio is largely concentrated in select largecaps.

According to some reports, LIC's total holdings comprise almost 3.6% of India's market capitalisation.

In 2023 so far, the biggest gainers in LIC's portfolio have been Aurobindo Pharma and DCM Shriram Industries with 92% and 90% gains. Adani Total Gas and Adani Energy Solutions were the top losers.

LIC's Portfolio Stocks Performance in 2023

Top Gainers	Change (%)
Aurobindo Pharma Ltd.	92%
DCM Shriram Industries Ltd.	90%
Glenmark Pharmaceuticals Ltd.	89%
Kirloskar Electric Company Ltd.	87%
Engineers India Ltd.	87%
Power Finance Corporation Ltd.	83%
Rail Vikas Nigam Ltd.	80%
Responsive Industries Ltd.	78%
Suzlon Energy Ltd.	73%
Polychem Ltd.	73%

Data Source: Equitymaster

It remains to be seen how LIC's holding fare in the remainder of 2023. We'll be back towards the end of the year to conduct a thorough analysis of the top gainers and losers in LIC's stock portfolio. Stay tuned.

Happy Investing.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...