The Life Insurance Corporation of India (LIC) is the largest institutional investor in the country, with a total equity portfolio of around Rs 10.27 lakh crore as of September 2022. The Adani Group is one of the fastest-growing conglomerates in India, with businesses spanning sectors such as energy, ports, logistics, mining, airports, and agro. The two entities have a long-standing relationship, with LIC holding stakes in various Adani Group companies.
LIC’s investment in the Adani Group benefits both parties in several ways. For LIC, it provides a diversified and high-return portfolio that can enhance its performance and profitability. For the Adani Group, it provides a stable and long-term source of funding that can help it execute its ambitious projects and expansion plans. Moreover, LIC’s investment also boosts the confidence and credibility of the Adani Group in the eyes of other investors, regulators, and customers.
In this blog post, we will explore how Adani LIC collaboration benefits both the entities and the Indian economy.
LIC’s investment in Adani Group has been rewarding for the insurer, as it has reaped handsome returns from the stellar performance of the Adani stocks. According to a report by Business, LIC’s investment in Adani Group was estimated to be around 7 per cent of its total equity portfolio as of September 2022. The value of LIC’s investment in Adani Group was Rs 70,000 crore as of January 2022, which increased to Rs 1.03 lakh crore as of June 2022, implying a gain of 47 per cent in six months. The report also stated that LIC had invested Rs 30,127 crore in seven out of ten Adani stocks as of March 2022, and the value of this investment had increased to Rs 33,686 crore as of February 2023. This means that LIC had earned a return of over 11 per cent in less than a year from these stocks.
LIC’s investment in Adani Group has also helped the insurer diversify its portfolio and reduce its exposure to other sectors adversely affected by the COVID-19 pandemic, such as banking, auto, and telecom. Moreover, Adani LIC collaboration has enabled the insurer to participate in the growth story of one of India’s most dynamic and diversified groups, which has a strong presence in sectors vital for the country’s development, such as renewable energy, infrastructure, and logistics.
Adani Group has also benefited from LIC’s investment, providing it with a stable and long-term funding source for its ambitious expansion plans. LIC’s investment has enhanced the credibility and reputation of the Adani Group in the domestic and international markets, as it reflects the confidence and trust that the largest institutional investor in India has in the group’s vision and strategy. Furthermore, LIC’s investment has helped the Adani Group to improve its corporate governance and transparency standards, as it has to comply with the stringent norms and regulations that apply to listed companies.
Adani Group has also leveraged LIC’s investment to raise more capital from other sources, such as foreign portfolio investors (FPIs), private equity funds, banks, and bond markets. For instance, Adani Green Energy Ltd (AGEL), one of the largest renewable energy companies in the world, raised $1.35 billion from a consortium of 12 international banks in June 2022 to fund its solar and wind projects. AGEL also raised $750 million from global investors through a green bond issuance in July 2022. Similarly, Adani Ports and Special Economic Zone Ltd (APSEZ), India’s largest port operator, raised $750 million from overseas investors through a bond sale in August 2022.
These fund-raising activities have enabled the Adani Group to reduce its debt burden and improve its liquidity position.
LIC’s investment in Adani Group is also beneficial for the Indian economy, as it supports the growth and development of key sectors with a significant multiplier effect on other industries and generate employment opportunities. For example, Adani Group is one of the most significant contributors to India’s renewable energy sector, which is crucial for achieving India’s climate goals and reducing its dependence on fossil fuels. As per a report by Invest India, Adani Group has an installed renewable energy capacity of 14.8 GW as of September 2022, which accounts for 23 per cent of India’s total renewable energy capacity. The group also has a pipeline of 34 GW of renewable energy projects under development or construction. These projects are expected to create over 1 lakh direct and indirect jobs and save over 1.4 billion tonnes of carbon dioxide emissions over their lifetime.
Similarly, Adani Group is also a significant player in India’s infrastructure sector, which is essential for enhancing India’s competitiveness and productivity. The group operates 12 ports and terminals across India, which handle over 25 per cent of India’s cargo traffic. The group also operates six airports in India, which cater to around 10 per cent of India’s passenger traffic. The group is also involved in developing industrial parks, logistics parks, railways, roads, and metro rail projects across the country. These projects are expected to boost India’s trade, connectivity, and urbanization.
In conclusion, the Adani LIC alliance benefits both the entities and the Indian economy, creating a win-win situation for all the stakeholders. LIC’s investment in Adani Group has generated attractive returns for the insurer while providing the group with a reliable and long-term partner for its growth plans. LIC’s investment in Adani Group has also supported the development of critical sectors that positively impact India’s economic growth, employment generation, and environmental sustainability. Therefore, LIC’s investment in Adani Group is a shining example of how institutional investors can catalyze India’s economic transformation.
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