LIC plowing more into Adani company despite ‘accounting fraud’ allegations

Modi posing for a photograph on Adani Group aircraft. [Photo: Adani Watch]

New Delhi: The largest life insurer in India is investing additional money in Gautam Adani’s main company despite the short seller’s alleged accounting fraud that caused the market value of the group to drop by more than $50 billion in only two sessions.

According to a report by Economic Times, the state-controlled Life Insurance Corporation of India is spending about 3 billion rupees ($37 million) as an anchor investor in a $2.5 billion new share sale by LIC’s investment signaled its vote of confidence in Asia’s richest man and his beleaguered group on January 25, which is facing its toughest test yet after US-based Hindenburg Research in its report earlier this week characterized its meteoric rise as “the largest con in corporate history.”

LIC is one of 33 institutional investors joining as anchors in the FPO, along with companies including Al Mehwar Commercial Investments LLC and the Abu Dhabi Investment Authority.

Although, the amount Mumbai-based LIC is investing is relatively tiny — considering it has almost 43 trillion rupees of assets under management at LIC — it marks a contrarian position to other domestic financial institutions that have little to no Adani investments.

Additionally, it coincides with a contagion that affected equities exposed to Adani Group, such as LIC, which experienced its biggest drop in more than a month on Friday in Mumbai.

“LIC thinks contrarian,” the report quoted Arun Kejriwal, founder of Kejriwal Research & Investment, as saying.

“It has always minted money whenever there is market volatility. It doesn’t receive money for a short duration. It acts as a long-only fund,” he added.

Earlier, a report by Hindenburg Research claimed that the Adani Group companies participated in a clear stock manipulation and accounting fraud scheme over decades. The report also led shares of the Indian giant to go down.

The Hindenburg Research report was prepared after two years of research and investigation by this forensic financial research firm.

In an official tweet, Hindenburg Research wrote, “Today we reveal the findings of our 2-year investigation, presenting evidence that the INR 17.8 trillion (U.S. $218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”

The research alleges that Gautam Adani, the founder and Chairman of the Adani Group has managed to amass a net worth of nearly $120 billion, largely through stock price appreciation over the last three years. It also alleges that the group’s seven key listed companies have spiked at an average of 819 per cent over the entire period.

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