LIC’s investments in Adani Group have increased sharply in past two years, say reports

The Life Insurance Corporation has significantly increased its shareholding in four out of seven listed companies of the Adani Group since September 2020, news reports have said.

The total value of the public sector undertaking’s shareholding in the seven Adani Group companies currently stands at Rs 74,142 crore, The Indian Express reported on Friday, citing the business conglomerate’s filings to stock exchanges.

The sharpest rise among LIC’s holdings in Adani Group firms has been in Adani Total Gas, in which the public sector undertaking’s stake increased from less than 1% in September 2020 to 5.77% in September 2022.

Similarly, LIC’s stake in the conglomerate’s flagship Adani Enterprises increased from less than 1% to 4.02%. Its holdings in Adani Transmission rose from 2.42% to 3.46%, and in Adani Green Energy from less than 1% to 1.15%.

The three Adani Group firms in which LIC’s shareholding has not increased significantly are Adani Ports, Adani Power and Adani Wilmar.

The Adani Group is the third largest entity into which LIC has invested after Reliance Industries and the Tata Group, according to Business Standard.

LIC’s investment in the Adani Group in the past two years has been 4.9 times the level of investments by mutual funds in the same stocks, The Morning Context reported. The public sector undertaking, on its own, reportedly accounts for 81.7% of the domestic institutional investment into five stocks from the Adani Group.

An unidentified corporate advisor told the website that the government-owned life insurer has been majorly increasing its investments in Adani stocks without an explanation.

“LIC is increasing its investments in AEL [Adani Enterprises Limited] every quarter without any explanation on what they see as the value,” the advisor said. “As an insurance company, LIC’s equity investments have to be transparent in the interest of policyholders. In my mind, these investments in Adani stocks go against that principle.”

In September, LIC had investments worth Rs 40.99 lakh crore. Out of these, 8.31 lakh crore, or 20.3%, were in equity shares. The insurer received gains of Rs 42,000 crore from its equity investments in 2021-’22, as against Rs 37,000 crore in the previous financial year.

Adani Group’s expansion

In the past few years, the Adani Group has diversified its interests from coal and ports and entered the domains of defence, urban water management, small and medium sector lending, power transmission, airports, data centers as well as cement and green energy sectors.

In May 2019, a report by Scroll.in showed that from 2014 to 2019, the Adani Group expanded its operations substantially despite relatively small profits and also at a time when other infrastructure companies were shedding assets.

In August, CreditSights, a debt-research unit of credit rating agency Fitch Group, warned that the Adani Group was “deeply overleveraged” as the conglomerate had been investing aggressively across several businesses.

CreditSights said that in the worst case scenario, the Adani Group could fall into a debt trap and default.