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

Last month, we wrote about the top penny stock picks and the top microcap stock picks of India's biggest insurer Life Insurance Corp (LIC).

Today, let's go over LIC's top smallcap holdings, further broadening our search for these smaller market players.

Investing in small-cap stocks can be a lot like searching for hidden gems in the market. These companies, often overlooked by mainstream investors, can hold significant growth potential.

Here are the top 5 small-cap stocks that make up a significant holding of LIC's portfolio.

#1 NMDC Steel

First on the list is NMDC Steel, the recently demerged entity of NMDC.

NMDC Steel's product mix consists of low carbon steel, HSLA & dual phase steel, and API quality steel that can be rolled into thickness range from 1 mm to 16 mm.

With its capability to roll 1,650 mm wide HR, the thin slab caster at Nagarnar Steel plant is the widest mill in the public sector.

The company owns and operates the state-of-the-art 3.0 MTPA steel plant at Nagarnar, Chhattisgarh. The steel plant was built at a cost of Rs 240 billion (bn).

As of June 2023, Life Insurance Corp (LIC) held 14.2% stake in the company.

Considering the current market price of Rs 51.43, the insurance company's exposure in NMDC Steel comes to Rs 21.3 bn.

Since its listing in February this year, NMDC Steel share price has moved up quite significantly and is up around 90% in less than 7 months.

The stock is now trading very close to its book value of Rs 58.2.

The recent rally in the steel stock could be attributed to the company's steel plant achieving a new milestone of producing hot-rolled coil from hot metal in just nine days.

#2 RVNL

Second on the list is Rail Vikas Nigam Ltd (RVNL).

The company is engaged in the business of implementing various types of rail infrastructure projects assigned by the Ministry of Railways.

The company actively bids for rail and metro rail projects in India.

Apart from India, the railway company is currently in the process of expanding presence in global markets.

During the financial year 2023, it entered overseas markets and signed an MoU with Kyrgyzstan for an order worth approximately Rs 180 bn.

It is planning to expand its overseas presence and take up projects in several other countries.

As of June 2023, LIC held 5.65% stake in the company or 117.9 million (m) shares.

Considering the current market price of Rs 167, the insurance company's exposure in RVNL comes to Rs 19.7 bn.

LIC initially acquired 8.72% stake in the state-owned railway company.

RVNL has turned out to be a blockbuster stock for LIC as its shares have zoomed over 125% in 2023 so far.

As visible from the chart above, shares of the company saw a steep rally in April 2023. Back then, it received an order of 120 trains for the Vande Bharat project from the government of India.

Since then, a lot of positive developments in the railways sector have kept the company's stock price on a roll.

Currently, RVNL has a strong order book of over Rs 650 bn, focusing on railway, metro, and overseas projects.

The company is confident in its ability to execute projects and maintain positive growth, targeting an order book of Rs 750 bn to Rs 1 tn.

Going forward, the company's margins could improve as the huge order book gets executed.

#3 Tata Chemicals

Third on this list is Tata Chemicals.

The Tata group company operates in both basic and speciality chemistry. It has the largest saltworks in Asia, is the 3rd largest soda ash manufacturer in the world and is the 6th largest sodium bicarbonate manufacturer in the world.

The company provides key ingredients to many of the world's leading brands for glass, detergents, pharma, biscuit manufacturing, bakeries, and other industries.

Innovations in its specialty chemistry business have led to establishing Tata NQ - India's first and only nutritional science business.

As of June 2023, LIC held 7.14% stake in the company or 18.2 m shares.

Considering the current market price of Rs 1,036, the insurance company's exposure in Tata Chemicals comes to Rs 18.9 bn.

The upcoming September 2023 shareholding pattern for Tata Chemicals will change this holding as the country's largest insurer recently added more shares in the leading chemicals manufacturer.

It raised shareholding in Tata Chemicals by over 2% in July and August 2023.

Post the acquisition of additional shares, LIC holds a total of 23.4 m shares of Tata Chemicals.

In recent weeks, shares of Tata Chemicals have come under pressure after the company lowered soda ash prices due to improved availability of the product in the global market.

Weak Q1 earnings added to the pressure as the Tata group company posted a 12% decline in net profit to Rs 5.2 bn.

Over 50% of Tata Chemicals' revenue comes from its key product, soda ash.

Soda Ash is mostly used as an ingredient in the manufacture of dyes and colouring agents, synthetic detergents, fertilisers, glass, and gum.

Demand for soda ash is usually driven by rising construction in emerging economies. It is widely used in the construction, paper, and textile industries, among others.

The chemical is also used for air purification and water softening as environmental concerns rise.

For now, weak guidance and price cuts for Soda Ash have put shares of Tata Chemicals under pressure. But going forward, we won't be surprised to see the global demand improve.

In 2023 so far, shares of the company have gained 10%.

#4 Hindustan Copper

Fourth on the list is Hindustan Copper.

It's a government-owned corporation in the central public sector enterprise under the Ministry of Mines (India).

Hindustan Copper is the only vertically integrated copper producer in India engaged in a wide spectrum of activities ranging from mining, beneficiation, smelting, refining, and continuous cast rod manufacturing.

The firm holds a lease on more than 80% of the country's copper reserves. It has well developed infrastructure facilities, vertically integrated operations, a wide distribution network and an established customer base.

As of June 2023, LIC held 11.2% stake in the company or 108.6 m shares.

Considering the current market price of Rs 153, the insurance company's exposure in Hindustan Copper comes to Rs 16.7 bn.

LIC's investment in Hindustan Copper spans back over 10 years. Over the years, it kept picking additional stake as an when the company came out with an offer for sale (OFS) or when the government divested stake.

In recent months, the commodity stock has shown extreme volatility on the bourses.

First, it was in the news following a sharp run-up in copper prices.

After the sharp fall witnessed in 2022, MCX copper futures have gradually started to move up. This is more so recently on expectations of a revival in Chinese demand and growing supply risks in Chile.

Then, it posted weak earnings which had an immediate impact on its share price last month.

For the first quarter of FY24, Hindustan Copper posted a 17.5% decline in its net profit to Rs 472.8 m, primarily on account of higher expenses.

Expenses rose to Rs 3.2 bn in the June 2023 quarter against Rs 2.8 bn in the year-ago period.

The stock does have multiple tailwinds working in its favour.

The company is hopeful of commencing mining operations at its closed Rakha mine in Jharkhand. This mine has been closed since 2001. The state government recently gave in-principal consent to renew the lease.

Earlier this month, the Rajya Sabha also passed the Mines and Minerals (Development and Regulation) Amendment Bill. With this, the government seeks to provide a conducive legal environment to attract foreign direct investment (FDI) and junior mining companies.

In 2023 so far, shares of the company have gained over 40%.

#5 Capri Global Capital

Last on the list is Capri Global Capital.

Capri Global is a diversified non-banking financial company (NBFC) with presence across different segments like MSME, construction finance, affordable housing and indirect retail lending segments.

As of June 2023, LIC held 9.7% stake in the company or 19.8 m shares.

Considering the current market price of Rs 774, the insurance company's exposure in Capri Global Capital comes to Rs 15.5 bn.

LIC has frequently upped its stake in the NBFC over the years, more so in the past one year.

Capri Global has made strong inroads in the gold loans segment in the recent past. The company forayed into the gold loan vertical in FY23 to increase focus towards diversification of the loan book.

It became a little conscious lending to the construction segment.

Within the first year, it added 562 dedicated branches and scaled up a decent gold loan book.

For the first quarter of FY24, gold loans already account for 51% of its disbursals.

Going forward, the company is optimistic and expects margins to improve for FY24.

In 2023 so far, shares of the company have gained around 9%.

Other Smallcaps LIC has Invested in

Apart from the above, below are other smallcap stocks where LIC holds significant stake.

Company	No of shares	Holding as on June 2023
Dixon Technologies (India) Ltd.	3,409,395	5.72
Bata India Ltd.	8,664,673	6.74
Bank Of Maharashtra	289,991,096	4.10
Pfizer Ltd.	3,294,367	7.20
Central Bank Of India	227,021,558	2.62
DCM Shriram Ltd.	10,514,136	6.74
Housing & Urban Development Corporation Ltd.	115,745,860	5.78
UTI Asset Management Company Ltd.	12,665,051	9.97
Sanofi India Ltd.	1,369,833	5.95
Rites Ltd.	17,539,320	7.30
Mahanagar Gas Ltd.	8,219,236	8.32
Amara Raja Batteries Ltd.	12,354,916	7.23

Data Source: Ace Equity

How LIC's Portfolio Changed This Summer

According to filings, data shows that LIC's ownership went up in at least 40 stocks while it trimmed holdings in 75 other counters.

In the June 2023 quarter, LIC's stake rose over 4% in Kothari Industrial Corporation, over 2% in SAIL, and 1.7% Bata India.

Meanwhile, its top sells included TVS Motor, Britannia Industries, RVNL, Tata Communications, L&T, Titan, Tata Motors, ICICI Bank, and Reliance.

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

It remains to be seen how LIC's holding fare in the remainder of 2023. 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...