LIC To Cap Investment Exposure In Companies Post Adani Share Rout: Report

Gautam Adani led-Adani group's valuation dropped by over $100 billion following a damning report by Hindenburg Research, a short seller group based in the United States

Following criticism for investing in Adani Group companies, insurance behemoth Life Insurance Corporation of India (LIC) is planning to cap its debt and equity exposure to companies, reported news agency Reuters. State-run LIC faced criticism from economic experts and Opposition for having over $4 billion in exposure to the Adani Group of firms. 

Gautam Adani led-Adani group's valuation dropped by over $100 billion following a damning report by Hindenburg Research, a short seller group based in the United States. Adani group denied all the allegations. 

Citing two sources, the news agency said that LIC is planning to cap its debt and equity exposure in individual firms, group companies, and companies that are backed by the same promoters. One of the sources told Reuters, "LIC is looking to have 'boundary conditions' on its investments that would limit its exposure to scrips."

LIC is India's largest domestic institutional investor with about $539 billion in assets under management. According to the report, the caps would reduce the LIC's risk. Currently, LIC is only permitted to invest up to 10 per cent of a company's outstanding debt and 10 per cent of its outstanding equity.

The Insurance Regulatory and Development Authority of India (IRDAI) bars insurers from having more than 15 per cent of their investment funds in equity and debt of companies owned by one corporate or a promoter group.

The action aims to fortify investment practices and shield LIC from criticism of its investment choices or exposure to organisations like the Adani group, the second source told the news agency. 

"It is now planning to come up with sub-limits for such investments to keep a check on its exposure," the source said.

LIC has invested Rs 301.2 billion in shares of Adani group companies and has a debt exposure of Rs 61.82 billion. 

On Monday in a written reply to the Lok Sabha, Finance Minister Nirmala Sitharaman said, "The Life Insurance Corporation of India (LIC) has informed that its debt exposure to Adani group of Companies, was Rs 6,347.32 crore and Rs 6,182.64 crore, as on December 31, 2022, and March 5, 2023, respectively".