07 Jun 2022

LIC versus Delhivery; a tale of 2 IPOs in the Indian market

It was almost like a tale of 2 IPOs. Both LIC and Delhivery hit the IPO market around the same time. They were stocks that most of the market players were looking up to set the trend. However, the performance of the two stocks has been diametrically opposite in both the cases.

While LIC had a tepid listing and then fell sharply below the issue price, Delhivery bounced from a tepid listing to outperform the Nifty since its listing. First the similarities.

There were a number of similarities between the two companies. Firstly, both the IPOs were among the early birds to hit the market after the Russian oil crisis and the virtual drying up of IPOs. Secondly, both the issues saw tepid subscription during the IPOs.

Thirdly, both the IPOs had substantially reduced their issue size since they believed that the appetite for a very large issue may not be there. Lastly, both the companies are industry leaders. LIC dominates the life insurance segment while Delhivery dominates logistics.

However, the similarities end there. The story of the two IPOs have been vastly different. For starters, Delhivery issue saw heavy institutional interest during the IPO, especially the FPIs.

However, in the case of LIC, the institutional interest came more from the domestic mutual funds. The real difference between the two companies is in the post listing performance. That is the story we will look at today.

How exactly has LIC performed since listing. The price of the LIC IPO was discovered at the upper end of the price band at Rs.949. However, retail investors got a discount of Rs.45 and policyholders got a discount of Rs.60.

Hence their effective IPO prices were Rs.904 and Rs.889 respectively. The stock was supposed to be reasonably priced since as a multiple of its embedded value, the market cap of LIC was more reasonable compared to private peers.

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However, that was not evident in the price performance of LIC. The stock listed below the issue price of Rs.949 and kept sliding lower. Since listing, the high price of the stock is Rs.918.95 while the low price is Rs.751.80.

As on the close of trading on 07th June 2022, the stock of LIC is trading close to its lows at Rs.752.90. That translates into a discount of -20.7% to the IPO price of Rs.949. In the case of the retail investors and the policyholders, the discount to issue price is better at -16.7% and -15.3% respectively, but still deep in losses.

The story is certainly better in the case of Delhivery. The price of the Delhivery IPO was discovered at the upper end of the price band at Rs.487. The stock had a tepid listing but picked up sharply after that. In the period since listing, the stock of Delhivery has touched a high price of Rs.617.35 and a low price of Rs.467.50. The stock has remained above the issue price for a better part of the post listing period.

That was evident in the price performance of Delhivery. As on the close of trading on 07th June 2022, the stock of Delhivery is trading at a price of Rs.516.95. That translates into a premium of 6.2% over the issue price of Rs487.

Of course, the stock is much lower than its peak price of Rs617, but what is gratifying is that the stock is still above its IPO price despite the consistent carnage in the stock markets.

What could be the reason?

One reason could be the quarterly results for the March 2022 quarter. LIC saw is profits fall by 15% yoy for the quarter. On the other hand, Delhivery maintained losses at the same level as last year, despite its total revenues and its gross order value (GOV) doubling on a yoy basis. It is this dichotomy that the prices of the two stocks are probably reflecting.