LIC to limit investment exposure following Adani Group’s Downturn

LIC to limit investment exposure following Adani Group's Downturn

LIC plans to limit debt and equity exposure to companies:

Reportedly, the LIC is planning to enforce limits on its debt and equity exposure to various companies. This move comes after the insurer faced criticism for its investment in Adani Group companies, and aims to decrease the concentration of risk. According to Reuters, sources have revealed that the insurer plans to set boundaries on its investments, capping its debt and equity exposure to individual firms, group companies, and those backed by the same promoters.

LIC faces criticism for investment in Adani Group companies:

With assets under management of approximately $539 billion, LIC had invested over $4 billion in Adani, leading to widespread criticism from parliamentarians who called for an investigation into the insurer’s decision to invest in Gautam Adani’s companies. If the LIC board approves the proposed caps, the insurer’s exposure to individual scrips would be further limited, with a maximum of 10% of outstanding equity and 10% of outstanding debt allowed for investment in a single company.

IRDAI bars insurers from investing more than 15% in equity and debt of one group:

Additionally, the Insurance Regulatory and Development Authority of India (IRDAI) bars insurers from investing more than 15% of their funds in the equity and debt of companies owned by one corporate or promoter group. The quantum of exposure will be decided by LIC’s investment committee before being taken to the board.

Adani Group not among LIC’s top holdings:

It’s worth noting that Adani Group entities, which received severe criticism, do not even feature among LIC’s top holdings. The insurer’s top-10 stakes include IDBI Bank (49.24%), LIC Housing Finance (45.24%), Standard Batteries (19.99%), Modella Woollens (17.31%), ITC (15.29%), NMDC (13.67%), Mahanagar Telephone Nigam (13.25%), Gloster (12.85%), Larsen & Toubro (12.50%), and Simplex Realty (12.38%).

About LIC:

Headquartered in Mumbai, the LIC is a public sector life insurance company. It holds the distinction of being India’s largest insurance company and the largest institutional investor, with total assets under management worth ₹41 trillion as of May 2022.

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