LIC still has big gains on Adani investments

Mumbai: Despite last week's meltdown in Adani Group stocks after questions were raised about their valuations, the Life Insurance Corp. of India (LIC), India's largest public sector investor, is still sitting on handsome gains in shares of group companies.

LIC is sitting on 100% gains on its stock and bond investments in Adani Group companies the total value of which is ₹56,000 crore compared to an investment of about ₹28,000 crore, a senior LIC executive told ET.

"Our book value of total equity and debt investments in the group, including the recently taken over Ambuja and ACC cement companies, is about ₹28,000 crore. At the peak, the mark-to-market value of these investments was ₹88,000 crore which though has come down, it is still well above the book value," the executive told ET on condition of anonymity.

The recent fall in Adani share prices will also not have any effect on LIC's solvency ratio which is based on the book value of the corporation's investment, the executive said. Adani Group shares fell between 5% to 20% on Friday after the US-based short seller Hindenburg Research levelled multiple allegations against the company in a detailed report.

The executive said that the fall in value is a small one compared to the value of LIC's current investments.

"All our insurance liabilities are linked to our book value so the fall in the stock prices has no impact on our solvency. The Adani Group investments are also a very small part of the more than ₹43 lakh crore total assets under management of the company at just more than 1.30%," the executive said.

A second LIC executive dismissed any immediate loss from its investments in the group because the average purchase price for all its Adani group company holdings is far less than the current market price.

"There is no question of loss for us,'' said the second LIC executive, who also did not want to be identified given the market sensitive information. "Our average cost of purchase is far lower than even the current market price. We are sitting on substantial gains," he said.

In the two trading sessions since the Hindenburg report was released on Wednesday, the Adani group companies lost 4.17 lakh crore in market valuation. Shares of LIC also lost 3.45% as concerns were raised on the value of its investment in these companies.

However, the LIC executives said with such a large investment book, such day-to- day fluctuations don't matter.

“We own stocks for the long term and day-to-day fluctuations don’t matter much. The question of loss arises only when you sell at a price lesser than what you paid for,” the second executive quoted above said.