Since its listing, LIC has sparked discussion about the post-listing performance of PSU (public sector undertaking) stocks. The insurance behemoth has been trading in red on most days since its market debut. The stock is down 15% from its listing price of ₹949. But LIC is not the first government stock to disappoint investors. As per Prime Database, half of 22 PSU stocks listed since 2010 are trading below their issue price. Through these 22 PSU stocks, the government raised ₹77,000 cr., a quarter of which was contributed by LIC.
But what went wrong with LIC in particular?
The most-awaited IPO of the year was able to raise ₹20,560 cr. despite unstable market conditions primarily due to the geopolitical tensions caused by the Russia-Ukraine war. Moreover, the stock was criticised for being overvalued, and the market did expect a beating in its post-listing price.
Talking about the fundamentals of the stock, Emkay Global says the size and legacy of LIC are the key limitations in transforming the product. They also add that LIC’s dominating market share of 60% could cause concern as it hides the operating challenges. Its dominance in the single-premium group fund management business deflates some of its cost ratios. While the insurer’s large network spanning 13 lakh agents is one of its strengths, it can cost LIC significant operation expenditure.
LIC also failed to cheer investors in terms of Q4 FY 2022 results. It reported a net profit of ₹2,409 cr., 17.41% lower than ₹2,917.33 cr. in the year-ago period. However, for fiscal 2022, the net profit was ₹4,043.12 cr, which is 39.4% higher when compared to FY 2021. Even the total revenue of ₹2,11,471 cr. is higher by 11.64% than that of the same quarter last year of ₹1,89,176 cr.
Should you invest in LICI?
So, if I talk about my say, I have already invested in LICI at a market price of 805. I will suggest you to invest at a price between 600–700 as definitely this stock will give you good returns in medium to long term.
As per my study buy this stock in 3 intervals by investing 33% capital now and rest 66% in 2 halfs in upcoming future.
Note: this is just a suggestion not a tip. Please do your own research before investing.
Thank you
