In this article, we will be discussing the stocks where Life Insurance Corporation (LIC) has taken more than 1% stake in the December quarter of Financial Year 2022. These two stocks are Dr. Lal PathLabs and Tata Elxsi. So, let’s try to know what could be the thought process behind acquiring this amount of stakes by LIC.
Dr. Lal PathLabs:
- The Omicron Variant of Covid-19 has caused a notable surge in the daily cases in the country and has caused the third wave of the Covid-19 in the country. The daily number of covid cases is making record highs and has not yet reached its peak.
- It has been observed that this ‘Omicron’ variant is a lot bigger wave i.e., around 4-5 times than the previous ‘Delta’ variant which causes the second wave of Covid-19 in the country. The big positive here is the low hospitalization and death rate in the third wave.
- Amid this concern of the ongoing third wave in the country and the rising covid-19 cases, the diagnostic sector is that space which gets highly benefited with such kind of situation.
- In the diagnostic space, there are 2 big names– Dr. Lal PathLabs and Thyrocare. But, post-acquisition of Thyrocare, the intention of the parent company is not clear regarding its delisting and hence institutional investors are staying cautious with this counter.
- While coming next to Dr. Lal PathLabs which is having more than 5,000 labs across the states in the country. So, here the company can get an advantage if the covid tests increase in the near time. As during the second wave of covid-19 in the country, the peak of covid cases testing was around 45-46 lakhs, and currently, only 16-17 cases testing is being done, which is just 1/3rd of the peak of second-wave cases testing.
- It is expected that the peak of the third wave of covid-19 could be in between January end to Mid February. And, hence here the covid-19 cases testing could be increased and its figure can reach the mark of 1 Cr. test per day which will certainly benefit such organized players in the diagnostic space.
- Besides this, LIC has taken a stake of more than 1% i.e., 1.12% which could also affect positively other institutional investors as well.
- In Tata Elxsi, LIC has taken a stake of around 1.04% in the September-December quarter of FY22.
- The automation space is expected to grow exponentially in the future, and Tata Elxsi could play its parts very well here with its niche thought process.
- The automation market is quite large where the size of automation in the automobile industry, EVs, smart vehicle industry, etc. is around $60 billion. And players like Tata Elxsi are not having a single presence, but are having a presence across the verticals as well.
What Should Shareholders Do?
Dr. Lal PathLabs being the organized player in the diagnostic industry will continue to enjoy the benefit of the same. From the longer point of view, it is expected that in a disease/pandemic, the awareness increases among the masses which can also be a tailwind for the diagnostic space. And talking about Tata Elxsi, it could be a big beneficiary of the opportunities available in the automation space. Therefore, an investor should look at both the space-Diagnostic and Automation for a longer period and the discussed stock on their radar.