LIC Investments in Adani Group Stocks ‘Turn Negative’: News Reports

LIC incurred losses of Rs 500 crore approximately on its Adani holdings, says CNBC. This, news networks say, has made the net position “negative”. LIC investing public money in the Adani Group has been controversial but the company has maintained that its exposure was only 0.975%.

New Delhi: At the close of trade on Thursday, February 23, the fall in share prices of the Adani Group was enough to ensure that India’s largest institutional investor, the publicly held Life Insurance Corporation of India (LIC) investments in Adani firms turned negative.

CNBC reports that as per its calculations, “the value of LIC Holding in Adani companies have eroded by another Rs 500 crore.” The network claimed that until Wednesday, LIC was sitting on a profit of Rs 94 crore on its Adani investments – but by noon on Thursday, that has been wiped out by the loss of Rs 500 crore on its shares it suffered, making it a net loss for the public sector company.

Business Today reported that LIC witnessed “an enormous notional loss of Rs 49,728 crore” amid the ongoing sell-off in Adani stocks. It says that “the cumulative market value of LIC’s investment in Adani Enterprises, Adani Green Energy, Adani Ports and Special Economic Zone, Adani Total Gas, Adani Transmission, Ambuja Cements and ACC declined to nearly Rs 33,242 crore on February 23, 2023, from around Rs 82,970 crore on December 30, 2022.”

Its loss calculations are based on the latest shareholding data available for the quarter that ended on December 31, 2022.

Meanwhile, the Hindu BusinessLine said that until a few months ago, it appeared that LIC had been smarter than its peers in the investment space by riding the over two-year rally in Adani Group stocks. But the gains “have been more or less washed out”. The decline in investment value in Adani Total Gas and Adani Enterprises has been the biggest contributor to the erosion of total gains, the newspaper said.

It said that the challenge ahead for LIC and other investors is that the insurance giant “may have to make investment calls based on volatility in Adani group stocks — whether they should add to current holdings or sell. If they chose to sell, this can create more pressure on Adani Group stocks and accentuate the current trend”.

On January 30, LIC, in a statement it made on the brouhaha over Adani’s shares in its portfolio, said its total holding under equity and debt was “Rs 35,917.31 crores as on 31.12.2022 under Adani group of companies.” LIC claimed last month that the market value for the investment at the closing of market hours on January 27, 2023 was Rs 56,142 crore, in excess of its investments over time, making the investments profitable.

LIC had maintained that the total Assets Under Management by LIC were over Rs 41.66 lakh crore as of September 30, 2022, and LIC’s exposure in the Adani Group was as low as 0.975%.

Even before the allegations made by Hindenburg Research, LIC’s decision to buy Adani Group shares was a matter of debate about choices being made by a public-sector company to invest in the “overleveraged” Adani Group.

After the Hindenburg report ̇ was published, it triggered a widespread sale of Adani stocks. The Adani Group, on its part, has denied all allegations levelled by Hindenburg Research in a 413-page report.

On February 8, LIC chairman M.R. Kumar said he will take a view on the company’s investment in Adani Group two to three years from now. He is also reported to have said that the state-run insurer would be calling the management of Adani Group to understand what was happening in the market and “if they (Adani) can throw some light on it”.

“We will be calling them sometime just to know the business profile and what they are planning to do and how are they planning to manage the whole thing,” the LIC chairperson had said.