LIC plans to cap exposure to companies

LIC is planning to impose caps on its debt and equity exposure to companies, two sources said, in a bid to lower concentration of risk following criticism of its investment in Adani group companies.

After the Adani group lost over $100 billion in valuation post scathing allegations by U.S.-based Hindenburg Research, state-run LIC was criticized for having over $4 billion exposure to companies from the group.

LIC, the country’s largest domestic institutional investor with assets under management of about $539 billion, is planning to cap its debt and equity exposure in individual firms, group companies and companies that are backed by same promoters, one of the sources, with knowledge of the matter, told Reuters.

“LIC is looking to have ‘boundary conditions’ on its investments that would limit its exposure to scrips,” said the source.

The sources did not want to be named as the discussions are private until the LIC’s board approves the plan. The LIC and federal finance ministry did not immediately reply to e-mails seeking comment.

The caps, once approved by the LIC board, would further limit the insurer’s exposure. Currently, the insurer cannot invest more than 10% of outstanding equity in a company and 10% of the outstanding debt.