Adani rout impact: LIC plans cap on investment exposure

Life Insurance Corporation (LIC) is reportedly planning to impose caps on its debt and equity exposure to companies, according to a report. This is being done to lower concentration of risk after the insurer faced criticism over its investment in Adani Group companies.

The insurer is planning to cap its debt and equity exposure in individual firms, group companies and companies that are backed by the same promoters, according to a report in Reuters that cited sources.

LIC that has assets under management of about $539 billion, had exposure to Adani to the tune of over $4 billion. The criticism took a political turn with many parliamentarians demanding a probe into the decision of the insurance major to invest in Gautam Adani-helmed conglomerate’s companies.

A source told Reuters that the insurer is looking to have ‘boundary conditions’ on its investments, which would limit its exposure to the scrips.

Moreover, the insurer cannot invest more than 10 per cent of outstanding equity in a company and 10 per cent of the outstanding debt. Now if the caps are approved by the LIC board, the insurer’s exposures would get limited further.

Then there is also the Insurance Regulatory and Development Authority of India (IRDAI) that bars insurers from putting more than 15 per cent of their investment funds in equity and debt of companies owned by one corporate or promoter group.

The source told Reuters that the quantum would be decided by LIC’s investment committee before it is taken to the board.

Adani Group entities, for which LIC faced severe criticism, do not even feature among the top holdings of the insurer. Its stake in Adani Ports amounted to 9.14 per cent, while it is 5.96 per cent in Adani Total Gas, 4.23 per cent in Adani Enterprises, 3.65 per cent in Adani Transmission, and 1.28 per cent in Adani Green Energy.

LIC’s top-10 stakes are as follows: IDBI Bank (49.24 per cent), LIC Housing Finance (45.24 per cent), Standard Batteries (19.99 per cent), Modella Woollens (17.31 per cent), ITC (15.29 per cent), NMDC (13.67 per cent), Mahanagar Telephone Nigam (13.25 per cent), Gloster (12.85 per cent), Larsen & Toubro (12.50 per cent) and Simplex Realty (12.38 per cent).

(With Reuters inputs)

Also read: For LIC, Adani is not the biggest problem