Exposure to Adani co stocks: LIC says it is sitting on comfortable MTM gains

Life Insurance Corporation of India (LIC) on Monday said it is sitting on substantial mark-to-market (MTM) gains despite Adani group company shares taking a beating even as it is closely examining the group’s rebuttal of Hindenburg Research’s allegations.

Raj Kumar, Managing Director, LIC, told businessline that despite Adani group company shares hitting the lower circuit, , the insurance major has substantial MTM gains. So, there is no impact on the policy holders. 

“Our solvency margin, which is around ₹2-lakh crore, is at book value. MTM gain is not taken into account for any of our calculations, except the embedded value, which will be declared on March 31.

“For policy holders, there is zero impact as of now because, as of January 27, we still have a substantial MTM gain of ₹25,000 crore in Adani Group company shares despite their shares getting beaten down. This gain is not a small amount,” he said.

The Corporation, in a statement, said its purchases over the last many years totalled ₹30,127 crore with the current market value at ₹56,142 crore as on January 27.

The state-owned life insurance behemoth’s statement comes in the wake of Adani Group company stocks getting battered after the US-based short-seller Hindenburg Research released a report on January 25 , alleging manipulation in these stocks, lapses in corporate governance, and financial mismanagement in the Group.

Raj Kumar observed that LIC’s policy liabilities are backed by assets at book value and not at MTM.

“If the market price goes below acquisition cost then only there will be an impact. We have exposure in other (Adani) group companies also, but we have substantial MTM gains,” he said.

Anchor investor

The LIC MD said the Corporation is one of the anchor investors in Adani Enterprise Ltd’s Further Public Offering (FPO).

“We have already put roughly ₹300 crore, which is about 1 per cent of our existing equity exposure to the Adani Group. Now, either the FPO sails through or fails.

“…If the FPO does not go through, we get back ₹300 crore. If it sails through then the market has accepted that there is value in the share. In both scenarios, there is no harm to us,” he said.

If LIC gets anchor allocation, there will be a 90-day lock-in period. So, it will not be able to trade in AEL shares for 90 days.

Referring to the Adani Group issuing a 413-page statement on the Hindenburg Research report, Raj Kumar said “We are studying that. We will definitely engage with the management of the Group to understand their point of view on the clarifications given by them on the report.”