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Gautam Adani-Hindenburg issue: Adani Enterprises shares and other Adani group stocks have been under sell off heat after the US-based short seller raising 86 question from the Adani group and raising concern over the debt positioning of the Adani group companies, state insurer Life Insurance Corporation (LIC) of India and State Bank of India (SBI) has been under scrutiny for their investment and debt exposure in Gautam Adani-owned companies.

According to stock market experts, despite heavy sell off in Adani group stocks, LIC is sitting with profit on its investment of around 30,000 crore whereas SBI has already declared that its debt exposure in Adani group companies is around 0.90 per cent of its total loan book. They said that SBI can recover from its debt exposure in Adani group in 9-10 months as their RoE is more than 10 per cent, in case Adani group fails to sustain against the Hindenburg Research allegations in its report. Similarly, they said that LIC has 26,000 crore cash in its hand and it has unclaimed amount to the tune of 21,000 crore. So, in case LIC's investment in Adani group stocks becomes zero, then in that case it can repay public money by using the cash in its hand and the unclaimed amount it has in its hand.

Speaking on whether public money in SBI and LIC is safe after Adani-Hindenburg saga, Santosh Meena, Head of Research at Swastika Investmart said, "Despite their exposure to the Adani Group, SBI and LIC investors should not be concerned. If we talk about the SBI, then it has exposure to the Adani Group of Companies of around 0.88% of its total loan book, which is small, whereas management is confident that this exposure is backed by strong cash flows. The banking sector's overall outlook is positive, and SBI is an ideal bet for the capex theme in India."

Speaking on recent Adani-Hindenburg row and its impact on LIC and SBI, Avinash Gorakshkar, Head of Research at Profitmart Securities said, "LIC has declared that its investment in Adani group stocks is around 30,000 crore whereas the absolute value of its investment in Adani group stocks is around 40,000 crore. So, LIC is sitting on hefty one third return on its investment in Adani group stocks over the years. If the nosedive in Adani group stock further continues, then in that case LIC has around 26,000 crore cash in its hands to repay the claim amount of its clients. The insurance behemoth has around 21,000 crore unclaimed amount as well. So, in total, it has more than 45,000 crore cash in had to address the crisis if its investment in Adani group stocks becomes nil."

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Avinash Gorakshkar went on to add that in case of SBI, the largest commercial bank in India has already declared that its debt exposure in LIC is less than one per cent of its total loan book. Today, SBI's RoE is more than 10 per cent. So, in case Adani group fails to repay its loan to the SBI, then in that case, the state-owned bank will be able to come out of this NPA within 9-10 months.

Comparing status of LIC and SBI in current Adani-Hindenburg crisis, Santosh Meena of Swastika Investmart said, "If we look at LIC, it is slightly riskier than SBI because it has 1% of its total AUM invested in Adani Group. However, the acquisition cost is lower, but further falls in Adani Group stocks may cause more weakness in this stock while the insurance sector itself is facing policy challenges. The LIC stock is already beaten down, so long-term investors should not panic; however, near-term volatility can't be ruled out."

After publication of Hindenburg Research report ahead of Adani Enterprises FPO, bond prices of Adani Ports and Adani Green, maturing in 2024, have also fallen heavily along with Adani group stocks. This has raised concerns over the public money being pumped in Adani group companies by SBI and LIC.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

ABOUT THE AUTHOR
Asit Manohar
Chief Content Producer at Live Mint Digital Team
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