Adani Group’s debt exposure to LIC is at $6,183 million: FM

Adani Group's debt exposure to LIC is at $6,183 million: FM

Key Points of Adani Group Debt Exposure to LIC:

  • Life Insurance Corporation’s (LIC) debt exposure in the Adani group has decreased from $6,347 crore to $6,183 crore from December 31, 2022, to March 5, 2023, according to Finance Minister Nirmala Sitharaman.
  • LIC’s highest exposure to the Adani group is to Adani Ports & Special Economic Zone, which is worth 5,389 crore.
  • Public sector banks approve loans after considering a project’s viability, potential cash flows, risk factors, and the presence of suitable security, according to the minister.
  • The RBI has implemented a large exposure framework that restricts a bank’s exposure to a single counterparty to 20% and to a group of connected counterparties to 25% of the eligible capital base of the bank to protect it from risk.
  • Banks must have a defined policy governing the debt-to-equity ratio for project financing to guarantee that promoters contribute equity funds proportionate to bank funding.
  • The RBI has mandated 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 to address the concentration risk resulting from large exposure to the banking system.
  • According to the minister of state for finance Bhagwat Karad, LIC’s total holding under equity and debt in the Adani group of companies was 35,917.31 crore, representing 0.975% of LIC’s entire AUM at book value as of December 31, 2022.
  • The Supreme Court has established a group led by retired judge Justice AM Sapre to investigate claims that the Adani Group and other listed businesses have violated market laws

Details of Adani Group Debt Exposure to LIC:

According to Finance Minister Nirmala Sitharaman, from December 31, 2022, to March 5, 2023, Life Insurance Corporation’s (LIC) debt exposure in the Adani group decreased from $6,347 crore to $6,183 crore. The minister said Parliament that of the total exposure of 6,183 crore, the insurance giant’s exposure to Adani Ports & Special Economic Zone is highest at 5,389 crore.

The data provided by the finance ministry also showed that LIC’s exposure to Adani Power (Mundra) is worth 266 crore, Adani Power Maharashtra (Phase 1) is worth 81.6 crore, Adani Power Maharashtra (Phase 3) is worth 255 crore, Raigarh Energy Generation is worth 45.4 crore, and Raipur Energen is worth 145.6 crore.

According to the minister, the five general insurance companies in the public sector have disclosed that they “do not have loan or credit exposure to Adani group” of enterprises.

According to her, public sector bank loans are approved after considering a project’s viability, potential cash flows, risk factors, and the presence of suitable security. Loan repayment is guaranteed by the money generated by the project, not by the company’s market capitalization.

According to the minister, the RBI has implemented a large exposure framework that restricts 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. This framework was put in place to protect banks from risk.

In order to guarantee that promoters contribute equity funds proportionate to bank funding, banks must also have a defined policy governing the debt-to-equity ratio for project financing.The RBI has mandated 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 in order to address the concentration risk resulting from large exposure to the banking system.

In response to the question of whether lending from public financial institutions and investment in the Adani group have increased over the past eight years, minister of state for finance Bhagwat Karad stated that as of December 31, 2022, LIC’s total holding under equity and debt in the Adani group of companies was 35,917.31 crore. According to him, LIC’s exposure to the Adani group represents 0.975% of LIC’s entire AUM at book value. Interestingly, as of September 30, 2022, LIC’s total assets under administration were valued at 41.66 lakh crore.

According to the minister, the total exposure of the public insurance firms New India Assurance Company Limited, United India Insurance Company Limited, National Insurance Company Limited, Oriental Insurance Company Limited, and General Insurance Corporation of India to the Adani Group as of 31.1.2023, was 347.64 crore, or 0.14% of the combined AUM of the five firms.

The Center has been informed that SEBI is looking into the claims made in the market regarding the Adani group of firms.

Pankaj Chaudhary, the minister of state for finance, also informed the Lok Sabha that a report released by US-based short seller Hindenburg Research caused the market capitalization of the nine listed companies comprising the Adani group to drop by about 60% between January 24, 2023, and March 1, 2023. The junior minister declared, “The volatility in the equities of these companies has not had any appreciable impact at the systemic level. According to the minister, the Nifty 50 fell by about 4.5% during that time.

Incidentally, the Supreme Court established a group earlier this month to investigate claims that the Adani Group and other listed businesses had violated market laws. The panel is led by retired judge Justice AM Sapre.

About Adani Group:

Adani Group, with its flagship company Adani Enterprises, is a multinational conglomerate based in Ahmedabad, India. Gautam Adani founded the company in 1988 as a commodity trading business.

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