Post report claims Govt directed LIC to invest $3.9 bn in Adani, insurer says ‘baseless’

In its statement, LIC said, “No such document or plan as alleged in the article has ever been prepared by LIC, which creates a roadmap for infusing funds by LIC into Adani group of companies. The investment decisions are taken by LIC independently as per Board approved policies after detailed due diligence. The Department of Financial Services or any other body does not have any role in such decisions…. These purported statements in the article appear to have been made with the intentions to prejudice the well settled decision-making process of LIC and also to tarnish the reputation and image of LIC and the strong financial sector foundations in India.”

A government official told The Indian Express that DFS has not written any letter to LIC asking it to invest in the Adani Group. “The documents being mentioned in the media are not from DFS. It’s not true that DFS wrote to LIC to invest in Adani companies… DFS doesn’t write such letters to LIC,” the official said.

LIC sources said the state-owned life insurer has not received any letter or document from DFS about investing $3.9 billion in the Adani Group. “LIC has not asked for any approval from DFS to invest in Adani group. It’s not true,” a senior LIC executive said.

“LIC’s investments are all long term. This is done as per the IRDAI regulations and as per the board approved policy. LIC’s investments in the shares of Adani group companies are around Rs 39,000 crore. Many of these were done even before some of these came under the Adani fold,” the executive said.

“LIC investments in other business groups like Reliance, Tatas and Birla are much higher than its investment in Adani. The Rs 5,000 crore investment in NCDs of Adani Port is less than one per cent of its total investment of Rs 5-6 lakh crore investment every year,” the executive said.

Emails sent by The Indian Express to Niti Aayog and the Adani Group on the report did not elicit any response.

However, in its response to the Washington Post, the Adani Group had said, “We categorically deny involvement in any alleged government plans to direct LIC funds… Assertions of undue political favour are unfounded….. our growth predates Mr Modi’s national leadership.”

According to the claims in the report, the proposal materialised the same month that Adani Ports and Special Economic Zone Ltd sought to raise around $585 million through a bond issue to refinance existing debt. “On May 30, Adani Group announced that the entire bond had been financed by a single investor — LIC — in a deal immediately criticised by opposition leaders and commentators as a misuse of public funds,” the newspaper claimed.

According to the report, the documents and interviews show “it was just one piece of a larger plan by Indian authorities to direct taxpayer money to a conglomerate owned by one of the country’s most prominent and politically well- connected billionaires”. As per the claims made in the said report, the DFS documents acknowledged that the proposed investment strategy came with risks. “Adani’s securities are sensitive to controversies… causing short-term price fluctuations,” the newspaper claimed, quoting one document.

It further said the said document noted, “LIC lost roughly $5.6 billion in gains on paper after the 2023 Hindenburg report, with its investment value falling to roughly $3 billion by February 2023. The value of LIC’s holdings recovered to $6.9 billion by March 2024, the document said, meaning losses had not been fully recouped at that time. The current market value of the investment could not be determined,” the Washington Post report said.?Reacting to the report, Congress party President Mallikarjun Kharge said the real beneficiary of Direct Benefit Transfer is not the country’s common citizen, but “Modiji’s best friend”. Party spokesperson Jairam Ramesh said, “The question arises: under whose pressure did the officials of the Ministry of Finance and NITI Aayog decide that their job was to bail out a private company facing funding difficulties due to serious allegations of criminality?? Is this not a textbook case of ‘mobile phone banking’?”

On December 2, 2022, The Indian Express reported that LIC increased its stake sharply in four of the seven listed Adani Group companies in just eight quarters since September 2020. Publicly available data showed that the total value of LIC’s holdings in these seven companies stood at Rs 74,142 crore as on December 1, 2022, and that was 3.9 per cent of the Adani Group’s total market capitalisation of Rs 18.98 lakh crore then. Of its own equity portfolio, which was about Rs 9.3 lakh crore as on June 30, 2022, the value of LIC’s holdings in Adani Group companies at the closing price on December 1, 2022, accounted for 7.8 per cent.

Reflecting this increase in shareholding and stock prices, the worth of LIC’s shareholding and its value of LIC’s holding in the Adani Group companies multiplied 10 times since September 2020: From just Rs 7,304 crore, or 1.24 per cent of the insurer’s equity AUM (assets under management), to Rs 74,142 crore, or 7.8 per cent on December 1, 2022.

Adani Groups stocks have faced pressure on multiple accounts since Hindenburg Research came out with its report in January 2023 alleging the group of “brazen stock manipulation and accounting fraud scheme over the course of decades” and then the US court indictment of Rs 2,000 crore bribery charge to secure energy contracts in November 2024. In the 22-month period, investors suffered a huge loss of Rs 7,00,000 crore ($ 82.9 billion) in ten Adani group companies.

Last month, on September 19, the Securities and Exchange Board of India dismissed a set of allegations–stock manipulation and siphoning of funds against Gautam Adani, Chairman, Adani Group, Rajesh Adani, and various other group entities– that were levelled by US-based short-seller Hindenburg Research in January 2023. The capital markets regulator SEBI said in two separate orders that there was no violation of related party transactions by the Adani Group entities.