How LIC Avoided Getting into the Paytm IPO

When the stock of Paytm listed at a discount and kept dipping sharply, one of the big questions in the minds of people was the exposure of LIC to Paytm. After all, LIC with an investible corpus of close to $360 billion remains the single largest institutional investor.

The investment AUM of LIC is almost as large as the entire mutual fund AUM in India. How then did LIC escape the Rs.18,300 crore Paytm story? But first the Paytm story.

There was an element of surprise when Paytm decided to fix the IPO price at the upper end of the price band at Rs.2,150. After all, the issue had been subscribed just about 1.89 times. What followed was worse! On the day of listing i.e. 18th November, the stock closed 27% lower.

Check - Paytm IPO - Listing Day 1 Performance


On 22-Nov, Paytm was 41% below the issue price at one point before bouncing back to close around 36.3% below the IPO price at the end of Day-2 of listing. But, how did LIC miss out Paytm?

One of the investment principles that LIC follows is to not invest in IPOs. The general practice, although not publicly articulated, is to let a company list and observe the performance of the company and the stock for some time before taking a call on the stock.

Hence LIC has neither been a participant in IPOs nor in a stock immediately after listing. Needless to say, LIC has also not participated in the anchor placement that an IPO issuer typically does ahead of the IPO opening.

LIC insiders have reportedly admitted that while they may have lost some opportunities in the process, but this principle has stood them in good stead over the longer run. You just need to look at their profit numbers.

For the fiscal year ended Mar-21, witnessed gains of Rs.37,000 crore. FY22 has been still better with LIC witnessing gains of Rs.30,000 crore in the first seven months of the fiscal year itself.

Now for the flip side of this LIC story. On the second day of listing, Paytm IPO touched a low of Rs.1,271. However, from that point, the Paytm stock has gained an impressive 41% and currently trades at Rs.1,785 in just 3 days.

One can argue that the insistence on trading record may have cost LIC this opportunity of buying Paytm cheap, but then Paytm still trades around 16.5% below the IPO issue price, and LIC may not really have much to complain about.

The proof of the pudding lies in the fact that LIC continues to witness stupendous gains on its equity portfolio. In the investment business, a bird in the hand is always worth two in the bush.

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