InvestorQ : I am investor in LIC IPO. What should I do after this correction from the IPO price, should I still hold on?
Moii Chavate made post

I am investor in LIC IPO. What should I do after this correction from the IPO price, should I still hold on?

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Tisha Malhotra answered.
3 months ago
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LIC may have had a weak listing, but it has dipped further from these levels. Against the IPO issue price of Rs949, the price closed on Friday at Rs642.75, very close to its all-time low price of Rs642. Now the stock of LIC is down a full 32.3% below the issue price of Rs949 per share and shows no signs of bottoming out. Retail investors did get a discount in the LIC IPO but they are still sitting on deep losses, even after the discount consideration. With Fed hiking rates, the investment portfolio of LIC would take a hit and that is reflecting in the stock price of LIC. It was perhaps overpriced at the time of the IPO, but that is history.

The concern is that LIC may be losing out on the growth story to the private insurers. For the month of August 2022, the retail annualized premium equivalent (APE), grew 5.2% on a yoy basis against a healthier 8.9% growth for the private insurers. If you look at 3 year CAGR of the APE, LIC grew at a CAGR of 0.66% in last 3 years, against 12.6% for private insurers. Clearly, LIC has long enjoyed the dividends of its monopoly status, but now competition is pinching with 30% market share. LIC needs to focus on sweating its assets a lot more.

Coming to your question about what should investors do? LIC may still be a dominant player but growth is not on its side. The smart thing to do would be use bounces in LIC to gradually pare positions and add positions in private insurers. You may still incur losses on LIC by booking out now, but the best you can do is to reduce these losses. Maybe LIC may be a good long term option, but for now, you need good signals like LIC improving productivity, which is where it is missing the bus. Leveraging network is another idea, but long term.

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