LIC caught in cross fire
Mumbai, India serves as the corporate headquarters for the Life Insurance Corporation of India (LIC), a central public sector undertaking in India. The Indian government’s Ministry of Finance is the owner of it.
The Life Insurance of India Act, which nationalised the insurance sector in India, was approved by the Indian Parliament on September 1st, 1956, leading to the establishment of the Life Insurance Corporation of India. There have been mergers involving more than 245 provident societies and insurance businesses.
Some statistics about LIC
According to LIC, there were 290 million policyholders as of 2019, a total life fund of 28.3 trillion, and a total value of 21.4 million for policies that were sold during the 2018–19 fiscal year. Additionally, the business stated that 26 million claims were resolved in 2018–19. With revenue of $775,283 crore (US$97 billion) and a profit of $4,415 crore (US$550 million), it was rated 98th in the 2022 Fortune Global 500 list.
LIC’s holdings
The LIC invests in a variety of sectors, such as finance and investments, banking, construction and infrastructure, cement, chemicals and fertilisers, electricity and transmission, electrical and electronics, engineering, fast-moving consumer goods, information technology, hotels, metals and mining, motor vehicles and ancillaries, retail, textiles, transportation, and logistics.
Siddhartha Mohanty, managing director and chief executive officer of the state-backed Life Insurance Corp (LIC), reaffirmed that the insurance company is optimistic about its investments in the Adani group despite a significant decline in the stock price of the Gautam Adani-led conglomerate on February 1.
LIC’s take
“We talk to companies that we invest in as a regular,” Mohanty continued, telling CNBC-TV18 that “Adani investments are within our sensible criteria.”
- Mohanty’s remarks follow a US-based short-seller study by Hindenburg Research from last week, which raised worries about the company’s high debt and the valuations of seven listed Adani companies, as well as allegations of inappropriate use of offshore tax havens and stock manipulation by the group.
- The group, which has lost approximately $66 billion since Hindenburg Research, has received more than $4 billion in investment from LIC.
- Because of the extreme volatility in the share prices of the Adani group of firms, LIC had previously clarified its exposure to those businesses.
- According to LIC, the entire cost of the shares of Adani Group companies it has acquired over the years is Rs 30,127 crore. At current book value, this exposure by LIC to the Adani group represents 0.975 percent of the total assets under management (AUM).
- As concerns over stock volatility persisted, most Adani Group stocks fell on February
- The largest companies in the conglomerate are now seeing a $84 billion decline.
In response to news that Credit Suisse no longer accepts Adani firms’ bonds as collateral for margin loans, Adani Enterprises experienced a nearly 26 percent decline, closing at Rs 2,180.20 per share on the BSE. Adani Ports, a different group stock, too experienced a 20% decline in price and closed at $492.15 per share. Ambuja Cements’ 16.56 percent drop to close at Rs 334.60 and ACC’s 5.96 percent drop to close at Rs 1,852 contributed to the group’s additional decline.
Affect on LIC
Market capitalization (m-cap) for LIC has decreased by about Rs 65,400 crore. The market valuation dropped from Rs 4,44,141 crore, the closing figure on January 24, to Rs 3,78,740 crore today. Additionally, the stock has lost 14.73% in five days.
On Wednesday, the shares of Life Insurance Corporation of India (LIC) continued to decline for the sixth session in a row. Market capitalization (m-cap) for LIC has decreased by about Rs 65,400 crore. The market valuation dropped from Rs 4,44,141 crore, the closing figure on January 24, to Rs 3,78,740 crore today. Additionally, the stock has lost 14.73% in five days.
The decline in the price of LIC shares coincides with a decline in Adani Group stock. After a research by US-based short seller Hindenburg Research claimed that the Indian giant had participated in stock manipulation and an accounting fraud scheme over the course of several decades, shares of Adani began to decline. However, Adani Group rejected the assertion as unfounded.
The state-run insurer has stated that it will ask Adani’s management for clarifications about the short seller report. LIC owned 4.23 percent of the flagship Adani company (Adani Enterprises), 9.14 percent of Adani Ports, and 5.96 percent of Adani Total Gas.
A significant investor in Adani’s most recent share sale was the insurance behemoth. Adani Enterprises’ Rs 20,000 crore follow-on public offering (FPO) was successfully completed and received a significant bid from high-net-worth individuals and institutional investors. However, employees and retail investors responded poorly to tepidly to the offer.
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