Hindenburg report fallout: First time, value of LIC holding in Adani companies drops below purchase price

LIC is the largest domestic institutional shareholder in Adani Group companies and held 9.14 per cent in Adani Ports, 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, in the quarter-ending December 2022.

The state-owned insurer had continuously acquired shares in the tightly-held Adani Group companies over the previous nine quarters till December 2022, even as mutual funds shied away. Since September 2020, LIC increased its shareholding sharply in four of the seven listed Adani Group companies, and in at least one of them almost six-fold.

Shares of Adani Group companies have been under huge pressure over the last one almost one month since US-based Hindenburg Research released a report on the group alleging “brazen stock manipulation and accounting fraud”.

The market capitalisation of nine listed Adani Group companies was Rs 19.18 lakh crore on January 24, a day before the report was released, and is down 61 per cent at Rs 7,36,671 crore Thursday.

As the political Opposition expressed concern about LIC investments and bank exposure to Adani Group after the Hindenburg Research report, LIC sought to assuage fears and said in a statement on January 30: “The total purchase value of equity, purchased over the last many years, under all the Adani Group Companies is Rs 30,127 crore and the market value for the same as at close of market hours on January 27, 2023 was Rs 56,142 crore.”

Stock Exchange data shows that on January 27, the market value of the five Adani Group companies (excluding ACC and Ambuja Cements) where LIC holds more than 1 per cent, stood at Rs 55,565 crore. The difference between LIC’s own estimate of Rs 56,142 crore and The Indian Express’ estimate of Rs 55,565 crore, could be on account of less than 1 per cent holdings in Adani Power and Adani Wilmar. Companies are not required to disclose investors owning less than 1 per cent shares.

The fact that despite a sharp 62.8 per cent drop in market value of LIC holding in the five big Adani Group companies, it is only now below the purchase value suggests that the state-owned insurer bought into Adani Group when the prices were really low.

The plummeting of Adani Group companies’ share prices has also led to sharp erosion in the wealth of Gautam Adani. From being the third richest on the Forbes rich list a month ago, he is now down to 26th spot with a networth of $42.2 billion.

While the share price of Adani Enterprise (LIC holding 4.23 per cent as of December 2022) is down by 60 per cent since January 24, that of Adani Total Gas (LIC holding 5.96 per cent) is down by 79.5 per cent in the same period. Similarly, other group companies have also seen a sharp decline in their share prices: Adani Green Energy (LIC holding 1.28 per cent) is down 73.2 per cent; Adani Transmission (LIC holding 3.65 per cent) is down 72.8 per cent and Adani Ports (LIC holding 9.1 per cent) has seen a decline of 27.4 per cent.

Over the last nine quarters, state-owned LIC increased its shareholding sharply in four of the seven listed Adani Group companies, and in at least one of them almost six-fold. (Ambuja Cements and ACC have been excluded as they were acquired by Adani Group in 2022). Between September 2020 and December 2022, LIC stake in flagship Adani Enterprises rose from less than 1 per cent to 4.23 per cent, in Adani Total Gas, it jumped to 5.96 per cent from less than 1 per cent, in Adani Transmission, to 3.65 per cent from 2.42 per cent, and in Adani Green Energy, to 1.28 per cent from less than 1 per cent.

The only exceptions are Adani Ports, where LIC holding declined marginally from 9.61 per cent till September 2022 to 9.14 per cent in December 2022; and two other companies Adani Power and Adani Wilmar, in which it is under 1 per cent.