LIC Mumbai: After $100 billion erosion in Adani stocks in the wake of Hindenburg Research’s negative report, the Life Insurance Corporation (LIC) is mulling its debt and equity exposure limit to companies, according to a media report.
LIC has faced criticism over its investment in Adani stocks, especially after the market value of its holdings in the Adani Group turned negative recently, although it has since recovered.
The state-run insurance behemoth, which is the biggest domestic institutional investor in India, has assets under management (AUM) of around $539 billion.
It has revealed that its total exposure in Adani companies, including equity and debt, was valued at Rs 36,474.78 crore as of January 31, 2023.
LIC has revealed that it has purchased equities worth Rs 30,127 crore in Adani group companies over the last several years. In the context of LIC's total assets under management at book value, its exposure to the Adani group amounts to 0.975%.
"LIC is looking to have 'boundary conditions' on its investments that would limit its exposure to scrips," Reuters reported quoting a source close to the development.
If approved by the LIC board, the caps would further restrict the insurer's exposure to the Adani group. Currently, the insurer's investment in a company cannot exceed 10% of its outstanding equity or 10% of its outstanding debt.
In addition to the existing caps on investments in individual companies, the Insurance Regulatory and Development Authority of India (IRDAI) prohibits insurers from having more than 15% of their investment funds in equity and debt of companies owned by a single corporate entity or promoter group.
This move aims to strengthen investment strategies and protect LIC from public criticism regarding its investment decisions or exposure to entities like the Adani group, as per the report.
"It is now planning to come up with sub-limits for such investments to keep a check on its exposure," the report said, quoting a source.
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