LIC's share price drops 36% in 9 months after GIC invests in it; LIC has significant exposure to Adani

Last May, Indian state-run insurance company, Life Insurance Corporation (LIC) of India, went public.Among the investors who had subscribed to its shares included Singapore sovereign wealth fund GIC. LIC's IPO helped raise US$2.7 billion for the company.However, upon its market debut, LIC's shares immediately fell as much as 9.4 per cent. And thanks to social media financial commentator, Philip Ang, he has brought to our attention that LIC share price has dropped more than 30 per cent since its debut.As at 13 Feb 2023, LIC's share price closed at 606.7 rupees. This means it has suffered a 36 per cent drop from the IPO price of 949 rupees over a period of only nine months.During this same period,  BSE SENSEX, a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange, has increased in value.

LIC has significant exposure to Adani's share meltdown

LIC's share price further fell sharply in the last three weeks due to its significant exposure to Adani's share meltdown. LIC had invested 364.7 billion rupees (US$4.47 billion) in Adani companies.The Adani Group itself has lost about US$120 billion in market value since the publication of a report by Hindenburg Research on 24 Jan last month, alleging security fraud by the group.After a two-year investigation, the Hindenburg report charged that Adani’s conglomerate was engaging in a “brazen stock manipulation and accounting fraud scheme over the course of decades.”Hindenburg’s report alleged that Gautam Adani’s elder brother, Vinod Adani, has been managing a network of offshore entities used to facilitate security fraud linked to the Adani Group. Some of the entities were said to have been set up by Vinod in Singapore with paid-up capitals of just S$1,000.Hindenburg further alleged that these offshore entities often funnelled assets into or out of the Adani Group companies, helping the companies to avoid reporting losses and thereby bolstering the appearance of their reported earnings. Shares of various Adani Group companies have seen a massive sell-off after the release of Hindenburg's report.Moody's has also downgraded the ratings outlook for some Adani companies, while index provider MSCI said it would cut the weightings of some in its stock indexes. “These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the Group,” said Moody’s.Unfortunately, with LIC being linked to Adani Group, the meltdown in share prices of Adani Group companies naturally affects the share price of LIC, which in turn affects the investment of Singapore's GIC.