According to recent data compiled by PRIME Database, the Life Insurance Corporation of India (LIC) has suffered a notional loss of Rs 38,732 crore in the combined holding value of four Adani group stocks in the March quarter. The affected companies are Adani Enterprises Ltd, Adani Total Gas Ltd, Adani Transmission Ltd, and Adani Ports & Special Economic Zone Ltd. Despite this setback, LIC has continued to show its faith in Adani’s management and has upped stakes in Adani Total Gas, Adani Enterprises, and Adani Transmission during the quarter.
Adani Enterprises shares have experienced a 10 per cent rise since March 31, while Adani Ports and Adani Total Gas shares have also risen by up to 8 per cent. Adani Transmission is currently flat. LIC’s portfolio shares include top holdings in Reliance Industries, ITC, TCS, Infosys, and SBI.
The data from PRIME Database shows that LIC’s holding in Adani Total Gas saw the biggest value erosion for the quarter, plunging from Rs 24,221 crore at the end of the December quarter to Rs 5,743 crore at the end of March quarter. Similarly, LIC’s ownership in Adani Enterprises fell from Rs 18,588 crore sequentially to Rs 8,495 crore, while its March quarter ownership in Adani Transmission fell to Rs 4,080 crore from Rs 10,532 crore at the end of the December quarter.
Despite the losses, LIC has increased its stake in Adani Total Gas by 6 basis points to 6.02 per cent and in Adani Enterprises and Adani Transmission by 3 basis points each sequentially. The institutional investor currently holds a 4.26 per cent stake in Adani Enterprises and a 3.68 per cent stake in Adani Transmission. However, LIC’s holding in Adani Ports has decreased from 9.14 per cent to 9.12 per cent sequentially.
The Adani group has recently faced allegations of “brazen stock manipulation” and “accounting fraud” by US-based short seller Hindenburg Research, but Adani management has denied these accusations. Despite the controversy, LIC continues to invest in Adani’s stocks, indicating its confidence in the group’s management.
However, its recent stock market success has also attracted controversy and scrutiny. In June 2021, the Securities and Exchange Board of India (SEBI) began an investigation into Adani group companies over compliance with securities laws and regulations.
The recent allegations of fraud and manipulation by Hindenburg Research have further clouded the group’s reputation. The short seller accused Adani Enterprises of inflating the value of its flagship Carmichael coal mine in Australia and of routing money to tax havens. Adani management has dismissed these claims as “blatantly untrue” and “misleading”.
The controversy has also raised questions about the role of institutional investors like LIC in the Indian stock market. Some critics argue that such investors should be more discerning and responsible in their investment decisions, especially when it comes to companies with dubious track records or allegations of wrongdoing. Others point out that LIC is a government-owned entity with a mandate to generate returns for policyholders, and that its investment decisions should be guided by financial prudence rather than moral considerations.
As for LIC, its decision to increase its stake in Adani’s stocks despite the recent losses highlights the importance of a balanced and diversified investment portfolio, which can help mitigate risks and generate sustainable returns over the long term.
Regardless of the debate, the recent losses suffered by LIC in Adani’s stocks highlight the inherent risks and volatility of the stock market, and the need for investors to exercise caution and diversify their portfolios. While Adani’s future remains uncertain, the long-term prospects of India’s economy and stock market continue to be promising, with many experts predicting sustained growth and stability in the years to come.
