The life insurance corporation has significantly increased its stake in four of Adani Group’s seven listed companies since September 2020, news reports said.
The total value of the public sector enterprise’s shareholding in the seven Adani Group companies currently stands at Rs 74,142 crore, The Indian Express said on Friday, citing the business conglomerate’s filings with stock exchanges.
The sharpest increase among LIC’s holdings in Adani Group companies was in Adani Total Gas, in which the public sector entity’s stake increased from less than 1% in September 2020 to 5.77% in September 2022 .
Similarly, LIC’s stake in conglomerate 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 companies in which LIC’s stake has not increased significantly are Adani Ports, Adani Power and Adani Wilmar.
Adani Group is the third largest venture in which LIC has invested after Reliance Industries and Tata Group, according to Business standard.
LIC’s investment in Adani Group over the past two years has been 4.9 times higher than the level of mutual fund investment in the same stock, The morning context reported. The public sector entity alone reportedly accounts for 81.7% of domestic institutional investment in five Adani Group stocks.
An unidentified corporate adviser told the website that the state-owned life insurer had significantly increased its investment in Adani shares without explanation.
“LIC increases investment in AEL [Adani Enterprises Limited] every quarter without any explanation of what they see as value,” the adviser said. “As an insurance company, LIC’s capital investments should be transparent in the interest of policyholders. In my view, these investments in Adani shares are contrary to that principle.”
In September, LIC had investments worth Rs 40.99 lakh crore. Of this, Rs 8.31 lakh crore, or 20.3%, is in equities. The insurer made profits of Rs 42,000 crore on its capital investments in 2021-22, against Rs 37,000 crore in the previous financial year.
The growth of the Adani Group
Over the past few years, the Adani Group has diversified its interests from coal and ports and entered the fields of defence, urban water management, lending to small and medium sectors, power transmission, airports, data centers, as well as the cement and green energy sectors .
In May 2019, a report of Scroll.in showed that from 2014 to 2019 Adani Group expanded its operations significantly despite relatively low profits and also at a time when other infrastructure companies were divesting assets.
In August, CreditSights, the debt research arm of credit rating agency Fitch Group, warned that Adani Group was “severely over-indebted” as the conglomerate invested aggressively in several businesses.
CreditSights said that in a worst-case scenario, Adani Group could fall into a debt trap and default.