Delhi, India: Two sources stated that in response to criticism of its investments in Adani group companies, Life Insurance Corporation of India (LIC) plans to limit its debt and equity exposure to the companies in an effort to reduce concentration of risk.
State-run LIC was censured for putting more than $4 billion in bunch organizations after serious claims by US-based Hindenburg Exploration brought about the Adani bunch losing more than $100 billion in valuation.
According to sources, LIC, the nation’s largest domestic institutional investor with approximately $539 billion in assets under management, plans to limit its debt and equity exposure in individual firms, group companies, and businesses backed by the same promoters. Reuters was informed by someone familiar with one of the cases.
According to the source, “LIC wants to put limit conditions” on its investment, which would limit its investment in shares.
Since the discussions are private until the plan is approved by LIC’s board, the sources did not wish to be identified. An email requesting clarification did not immediately receive responses from LIC or the federal finance ministry.
Once the LIC Board approves the cap, the insurer’s exposure will be further restricted. The insurer cannot currently invest more than 10% of a company’s outstanding equity or 10% of its outstanding debt.
In addition, insurers are prohibited by the Insurance Regulatory and Development Authority of India (IRDAI) from investing more than 15% of their investment corpus in equity and debt of corporations or promoter groups.
According to the second source, the move is intended to stabilize investment strategies and prevent LIC from facing public criticism of its investment decisions or exposure to companies like the Adani group.
The first source stated that the insurer’s investment committee will determine the cap’s size before it is implemented, “soon.”
“It is presently intending to fix sub-limits for such ventures to screen its gamble craving,” said the source.
LIC has a credit exposure of Rs 61.82 billion and invested Rs 301.2 billion in shares of Adani group companies.
“The (current) overall limit imposed by IRDAI for investment in single group-owned entities could mean that LIC could invest substantially in group companies,” Behroz Kamdin, a partner at Deloitte India, stated.
“This may have an impact on its investments because of the volatility of the market and may cause the policyholders to lose money.”
This story’s text is published unchanged from a feed from a wire agency. The only change is to the headline.
