Hindenburg Research in its recent report, aimed at exposing the Adani Group, by alleging that it was involved in brazen fraud and stock manipulation. A conclusion has not been arrived at yet, customers should know that state entities like the LIC and SBI have also made liberal investments in the group.
The share prices of Adani Group companies are battered and have fallen by anywhere between 15% to 40% after Hindenburg said it had taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivative instruments.
The Adani group is considering legal action against Hindenburg research and is evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg. Meanwhile, there has been a concern regarding the exposure of the Life Insurance Corporation of India (LIC) and State Bank of India (SBI) in Adani Group’s stocks.
Congress general secretary Jairam Ramesh said that the high exposure of financial institutions such as the LIC and SBI to the Adani Group has implications for financial stability and for the crores of Indians whose savings are stewarded by these pillars of the financial system.
Alleviating concerns of investors, SBI Chairman Dinesh Kumar Khara said that there is nothing alarming about SBI’s exposure to the Adani group and that the Adani group had not raised any funds from SBI in the recent past. He said that the bank would take a prudent call on any fundraising request in the near future.
Another official told Reuters that SBI’s exposure to the Adani Group is below the large exposure framework of the Reserve Bank of India.
According to Jefferies, the group’s debt accounts for 0.5% of total loans across the Indian banking sector. For public sector banks (PSUs), the debt is at 0.7% of total loans and for private banks, it is at 0.3%.
“Since we are a large investor, we have the right to ask relevant questions and we will definitely engage with them,” LIC Managing Director Raj Kumar told Reuters.
LIC said that it has invested ₹ 364.7 billion ($ 4.47 billion) in Adani companies, about 1% of its assets under management. It is going through the group’s 413-page reply and if it feels that the concerns are not being addressed, it shall seek further clarification from the Group.
LIC further clarified that the credit ratings of all of the Adani debt securities held by LIC are AA and above. It is undeterred by the fraud allegations and is investing more money into Adani Enterprises.
Written by Simran Bafna
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