The value of Gautam Adani’s companies has grown exponentially, making him one of the richest person in the world. The shares of a number of the listed companies, including Adani Green Energy, Adani Enterprises, and Adani Transmission, have soared by more than 1,000% during the past few years. Adani has received numerous government contracts for infrastructure and energy.
The Adani Group is focused on creating, transferring, and mining coal, overseeing ports and airports, building huge solar farms among other things. In each of these categories, Adani’s businesses rank among the biggest. The Adani LIC partnership is proof that the Group is too big to fail.
The profile growth of Adani LIC collaboration
As of February 22, LIC’s investment value in Adani Group companies was Rs. 33,632 crores, according to the December shareholding pattern that was made publicly available on the markets. The value of LIC’s investments in the Adani Group was announced on January 27 and was shown to be Rs 56,142 crore. Despite the success of Adani’s businesses, private investors have been relatively cautious about purchasing Adani equities.
But because of the Adani LIC alliance, the government hasn’t had any such reservations. As, the Life Insurance Corporation (LIC) has shaken-hands with Adani, whose majority ownership is held by the government and which manages assets worth more than $500 billion (41 lakh crore rupees), more than 50 million customers pay the premiums for LIC’s insurance products. Few companies in India are more trusted by the general people than LIC.
In five of the seven listed Adani Group companies—Adani Enterprises, Adani Green Energy, Adani Ports, Adani Total Gas, and Adani Transmission—LIC has increased its stake over the previous two years, bringing the total to $9.5 billion. These assets made up 4.6% of the five firms’ total market value as of September 30. This has resulted in mutual funds investing more than five times in the same stocks.
How the Adani Group affects LIC’s fortunes?
Undoubtedly, LIC has significant holdings in the businesses owned by the Reliance and Tata groups. These conglomerates are older and more well-established. The Adani Group’s expansion has occurred very recently. Because of the Adani LIC partnership, LIC may stand to earn the most—as well as stand to lose the most—from fluctuations in the price of Adani shares. In five years, shares of Adani Enterprises, the group’s main company, had increased by more than 2,500%.
Over the last five months, it has purchased controlling stakes in companies in a range of sectors, including media, airports, and IT.
LIC’s historic influence in the insurance sector
The LIC of India’s primary goal is to protect the interests of the life insurers and serve as a trustee on both individual and collective basis, to increase the capacity for saving by offering a number of options for life insurance. Adani Enterprises, Adani Ports, Adani Total Gas, Adani Transmission, Adani Green Energy, ACC, and Ambuja Cement are the seven businesses in which LIC has an interest.
According to the Adani LIC partnership, the Adani group stocks have stabilised and may raise cash at the current price if desired. Analysts, however, are reassured by the Adani Group’s Rs 15,446 crore agreement with GQG Partners over the conglomerate’s capacity to raise capital. Analysts claim that by issuing warrants, rights issues, or any other instrument, promoters can utilise the monies acquired from the transaction to provide capital to any group firm in need of it.
Additionally, the transaction gives rise to the notion that the Adani group stocks have stabilised and may raise money if necessary at the existing levels.
Diversification as a risk mitigation strategy
The strategic approach of the Adani Group centres on diversity as a method of risk reduction. Its portfolio includes companies in the energy, logistics, agricultural, and real estate industries. The addition of cement assets fits in nicely with Adani’s plan to lessen reliance on any one industry. Adani strengthens its resistance to market swings by diversifying its business portfolio.
Ambuja Cements and ACC were purchased as part of a strategic drive to build a diverse and sustainable business portfolio, improving its capacity to deal with uncertainty. As economies diversify their production away from agriculture, trade diversification rises. Whether one focuses on the agricultural share in employment or in output, this conclusion holds for both LICs and other emerging nations. In contrast to trading partners, the link is significantly stronger for product diversity.
In a future where the majority of products are transferable, this connection between trade diversification and greater structural transformation would be expected. The Adani LIC partnership is beneficial for both the groups.