LIC reviews Adani's response to Hindenburg, plans to meet group's management
3 min read . Updated: 30 Jan 2023, 05:06 PM IST
Premium- The government-backed life insurer has pumped in 364.7 billion rupees ($4.47 billion) in Adani companies --- which accounts for 1% of its assets under management.
India's Life Insurance Corporation (LIC) on Monday revealed that they are reviewing Adani Group's over 400-page response to allegations raised by Hindenburg Research. Also, LIC plans to hold talks with the conglomerate's management within days. The government-backed life insurer has pumped in 364.7 billion rupees ($4.47 billion) in Adani companies --- which accounts for 1% of its assets under management.
LIC's Managing Director Raj Kumar told Reuters, "Presently there is a situation that's emerging and we are not sure what is the factual position ... Since we are a large investor, we have the right to ask relevant questions and we will definitely engage with them."
Further, Kumar said, "of course, we are studying the 413-page reply given by Adani Group," adding, "we will also see if the concerns are addressed. If we believe the concerns are not addressed, we will seek further clarification from them."
The US short-seller has accused Gautam Adani's group of stock manipulation, fraud schemes, high debt levels, and the use of tax havens among others.
Although Adani Enterprises who launched the ₹20,000 crore FPO closed in the green on Monday, however, could not offset the erosion of more than ₹1.53 lakh crore in the market cap of the Group's other six stocks.
On Monday, Adani Enterprises share price closed higher by 4%. However, other six Adani stocks extended their losses with majority of them hitting their lower circuits. Adani Ports share price was marginally down.
Adani Power and Adani Wilmar close at 5% lower circuit. Adani Green and Adani Total ended near 20% lower circuit. While Adani Transmission finished 15% lower after touching a new 52-week low of ₹1607.80 apiece.
LIC is one of the large shareholders in couple of Adani Group's companies. By end of the December 31, 2022 quarter, LIC shareholding stood at 4.23% in Adani Enterprises, 9.14% in Adani Ports, 3.65% in Adani Transmission, 1.28% in Adani Green Energy, and 5.96% in Adani Total Gas.
LIC shares dipped by 1.37% to end at ₹656.40 apiece on BSE.
LIC's announcement comes after Adani on Sunday said that its strategic and long-term investors have reposed complete faith and confidence in the group.
Further, Kumar said that LIC looks at the long-term view unless there is something going very bad.
As of now, LIC is gathering all the information, and clarifications and a further call will be taken after that accordingly. Kumar added to Reuters that LIC's decision in Adani stocks will also be based on an independent risk assessment, internal risk assessment, business profile, and growth trajectory.
Vinod Nair, Head of Research at Geojit Financial Services said, "The response by Adani had a mixed effect on the stock group and market. The saga is likely to continue as a hanging risk in the minds of the investors in the medium-term."
Nair added, "to expect a scientific assessment report either by a strong independent third party or government is dim in the short-term. Now the focus of the market will be on budget and fed policy."
On Sunday, Adani responded in over 400-page document to Hindenburg's allegation. The Indian conglomerate's statement said, "this is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India."
Adani's response said, "The mala fide intention underlying the report is apparent given its timing when Adani Enterprises is undertaking what would be the largest ever further public offering of equity shares in India."
To which Hindenburg retorted back in another detailed report on the same day. It said, "Adani also claimed we have committed a “flagrant breach of applicable securities and foreign exchange laws." Adding, it said, "Despite Adani’s failure to identify any such laws, this is another serious accusation that we categorically deny."
Also, Hindenburg said, "it also predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming our report amounted to a “calculated attack on India." In short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself."
Adani's ₹20,000 crore FPO received a little over 3% subscription on the second day of the issue. As per BSE data, the FPO received cumulative bids of 13,98,516 equity shares against the offered size of over 4.55 crore equity shares.
