Life Insurance Corporation of India (LIC), a government-owned firm that is India’s largest insurance company, is moving towards limiting its debt and equity exposure to companies.
This comes after LIC, the most trusted name in India’s insurance industry, was harshly criticized for having invested roughly 1% of its $508 billion in assets under management in companies belonging to the troubled Adani group. The massive rout in Adani shares, triggered by allegations of fraud from the US-based short seller Hindenburg Research in January, has forced investors to trim their holdings in group companies.
Till the release of Hindenburg’s report on Jan. 24, LIC’s investment in Adani stocks stood at more than $9.8 billion. By early March, it had slumped to $3.6 billion, The Economic Times reported.
In a bid to dilute similar risks, LIC now plans to further narrow its exposure to individual firms, group companies, and companies backed by a single promoter, Reuters reported today (March 24).
At present, India’s insurance regulator prohibits LIC from investing more than 10% of all its outstanding equity or debt in any single company. In other words, an investment in a single company’s shares can make up no more than 10% of the total value of LIC’s equity portfolio. Additionally, insurers are not allowed to hold more than 15% of their investment funds in the assets of companies owned by a single promoter group.
The limits as they currently stand “could lead to [LIC’s] investment getting impacted due to volatility in the market, and likely erosion of funds owed to policyholders,” Bahroze Kamdin, a partner at Deloitte India, told Reuters.
LIC’s shareholding in Indian companies
The value of equity holdings by LIC, the largest institutional investor in Indian markets, stands at over $14.2 billion, according to Trendlyne.
Its stake in Adani Ports amounted to 9.14%, followed by Adani Total Gas (5.96%) and Adani Enterprises (4.23%). For Adani Transmission, the figure was 3.65% and 1.28% for Adani Green Energy. Other companies include IDBI Bank (49.24%), ITC (15.29%), Mahanagar Telephone Nigam (13.25%), and Larsen & Toubro (12.5%), Business Today reported.