Dec 1, 2022
Of late, we have been discussing macro trends that affect the stock markets, the economy, and as an extension, the world. We have been zooming out to capture the big picture painted by investors, regulators, and the invisible hand of Mr. Market.
In this episode, Deepak & Shray break from the trend and do something different. Rather than zooming out, we zoom in. We discuss two companies that are going through fascinating developments and make for an interesting discussion.
LIC is a recently listed insurer that has a gigantic balance sheet and is a household name in our country of 1.4 billion. It operates in a market that is expanding wider as well as penetrating deeper. Yet, the company seems to be valued poorly by the markets. What’s happening here?
HDFC and HDFC Bank announced that they will merge at the start of this financial year. The merger is progressing rapidly, getting through from one regulatory approval to another, without much drama. But, this merger is causing drama at unrelated places that have nothing to do with the business or the merger (well, not directly at least). Will this merger make index funds do crazy rebalances?
2:00 - LIC has fallen 30% from its IPO. What’s going on?
4:25 - Cultural shift to maximize shareholder value
5:00 - Participating and Non-Participating Policy
“.. This quarter, LIC said, you know what we have 15000 crores of profit.. which we didn’t know we can take.. it turns out that they can and they did.. ”
11:15 - 100% of the profit from the Non-Participating Pool should have come to shareholders
19:30 - What happens to LIC, due to its high equity holdings, what happens if markets don’t do anything for the next 10 years?
25:30 - Why isn’t the market not enthusiastic about LIC if this is such a fantastic opportunity to buy?
30:15 - HDFC merger and the opportunity with Index Constitution
41:30 - The worrying thing about Index funds