LIC Sells Over 2% In Cipla: Should Retail Investors Be Concerned?

The Life Insurance Corporation of India (LIC) has sold a 2.127% stake in pharma major, Cipla. As per the filing made by Cipla to the stock exchange on Tuesday, Jan 8, 2012, LIC sold a total 1.70 crore shares of Cipla between Aug 21, 2012 to Jan 7, 2013. With this, LIC's stake in the company has come down from 8.34% to 6.21% between the months of Aug 2012-Jan 2013.

The FII stake in Cipla has been increasing in the last two years over the company’s robust performance. Between Sept 2011 and Sept 2012, FIIs hiked their stake from 13.57% to 20.79%. Between the June 2012 and Sept 2012 quarters itself, they increased their stake by 2.11%.

In this backdrop, LIC’s decision to sell stake may stand out in sharp contrast. However, it must be noted that the shares of Cipla have gained more than 29% in CY12, and most of these came in the second half of the year. This may have prompted LIC to book profits on its investment.

In the first half of FY13, Cipla has seen its domestic revenues rising by 21% while its exports revenue rose by 26%. The company’s EBITDA margins also grew from to 28.9% in H1FY13 from 23.2% in H1FY12. With the net profit rising by 60% in the first half of the fiscal, Cipla seems to be in good shape and on course to show an even better performance in the second half of the current fiscal.

Thus, we advise that investors who have bought shares in the company should not panic and should stay invested in the company.