LIC’s debt exposure to Adani group stands at ₹6,183 cr: FM

Finance Minister Nirmala Sitharaman has said insurance behemoth Life Insurance Corporation's (LIC) debt exposure in the Adani group fell to ₹6,183 crore from ₹6,347 crore from December 31, 2022, to March 5, 2023. Of the entire exposure of ₹6,183 crore, the insurance giant's exposure is highest at ₹5,389 crore to Adani Ports & Special Economic Zone, the minister informed Parliament.

Besides, LIC’s exposure to Adani Power (Mundra) stands at ₹266 crore; Adani Power Maharashtra (Phase 1) at ₹81.6 crore; Adani Power Maharashtra (Phase 3) at ₹255 crore; Raigarh Energy Generation at ₹45.4 crore; and Raipur Energen at ₹145.6 crore, the data shared by the finance ministry showed.

The five public sector general insurance companies have informed they “do not have loan or credit exposure to Adani group” of companies, the minister said.

She said public sector bank loans are sanctioned after assessing the viability of projects, prospective cash flows, risk factors and availability of adequate security and repayment of loans are ensured by the revenue generated by the project and not by the market capitalisation of the company.

The minister said as per inputs received from the RBI, to protect banks from risk, it has implemented a large exposure framework, which limits the exposures a bank can take to a single counterparty and a group of connected counterparties to 20% (extendable to 25% under exceptional circumstances) and 25%, respectively, of the eligible capital base of the bank.

Also, banks are required to have a clear policy regarding the debt-equity ratio for project financing to ensure promoters bring in equity funds proportionate to bank finance. "To address the concentration risk emanating from large exposure to the banking system, RBI has stipulated that banks maintain additional provisions and additional risk weights on the incremental exposures towards specified borrowers having an overall aggregate sanction credit limit of ₹10,000 crore."

On the question of whether lending to and investment in the Adani group from public financial institutions or public sector banks has increased in the last eight years, minister of state for finance Bhagwat Karad said till January 30, 2023, LIC’s total holding under equity and debt as on 31.12.2022 in Adani group of companies stood at ₹35,917.31 crore. LIC's exposure in the Adani group is 0.975% of LIC's total AUM at book value, he said. Notably, LIC's total assets under management are at ₹41.66 lakh crore as of September 30, 2022.

Public insurance companies, New India Assurance Company Limited, United India Insurance Company Limited, National Insurance Company Limited, Oriental Insurance Company Limited and General Insurance Corporation of India have a total exposure in Adani Group (as of 31.1.2023) is ₹347.64 crore which is 0.14% of the total AUM of all the five companies," says the minister.

Meanwhile, SEBI is undertaking an investigation into the market allegations against the Adani group of companies, the Centre has informed.

MoS finance Pankaj Chaudhary also told the Lok Sabha that the nine listed companies forming part of the Adani group saw a decline of around 60% of market capitalisation from January 24, 2023, till March 01, 2023, after a report published by US-based short seller Hindenburg Research. "The volatility in the stocks of these companies has not had any significant impact at the systemic level," said the junior minister. The minister said the Nifty 50 declined by around 4.5% during the same period.

Notably, the Supreme Court earlier this month constituted a panel headed by a retired judge, Justice AM Sapre, to examine alleged violation of market laws by Adani Group and other listed companies.