Hindenburg vs Adani Group: SBI, LIC savings at risk amid fraud allegations? SBI says this

The shares of several companies owned by billionaire Gautam Adani witnessed heavy losses on Friday (January 27) after a report by a US investment firm accused the Adani Group of being involved in committing "brazen" corporate fraud.

The report raised questions over the financial stability of Adani Group’s in the coming days and concerns are now raised over the savings of millions of Indians in big financial institutions like State Bank of India (SBI) and Life Insurance Corporation (LIC).

The Congress party demanded that a thorough probe should be launched into Hindenburg Research’s allegations adding that it may have exposed financial system of the country to systemic risks “through the liberal investments in the Adani Group made by strategic state entities like LIC, SBI and other public sector banks”.

Jairam Ramesh, Congress general secretary in charge of communications, said since the Adani Group is “no ordinary conglomerate” and has been “closely identified with Prime Minister Narendra Modi since the time he was Chief Minister of Gujarat.”

“Furthermore the high exposure of financial institutions such as the Life Insurance Company of India (LIC) and the State Bank of India (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 (sic),” Ramesh said.

"These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness. As much as 8 per cent of LIC's equity assets under management, amounting to a gigantic sum of ₹74,000 crore, is in Adani companies and comprise its second-largest holding," added a statement by Ramesh.

CPI(M) leader Sitaram Yechury also raised concerns ober Hindenburg’s allegations and said that if proven correct it will “destroy lives of crores of Indians who park lifelong savings in LIC & SBI.”

As Adani Group’s shares plunged heavily on Friday, some leading public sector banks of India tried to address the concerns of the investors by saying that their  exposure to the Adani Group was within the limits prescribed by the Reserve Bank of India.

"There is nothing alarming about our Adani exposure and we don't have any concerns as of now," SBI chairman Dinesh Kumar Khara told Reuters.

Khara added that no funding has been raised by Adani Group in the recent past and SBI would take a "prudent call" on any funding request from Adani Group in the future.

In a related development, a senior official at Bank of India said the loans by the bank to the Adani group were as per the RBI norms.

"Our exposure to the Adani Group is below the large exposure framework of the Reserve Bank of India," Reuters quoted an unnamed executive at the Bank of India as saying.

Meanwhile, LIC did not appear very much concerned about the allegations raised by Hindenburg research and is investing more money into flagship unit of Adani Group. LIC has decided to invest as much as USD 37 million as an anchor investor in a new share sale by Adani Enterprises Ltd.

The Adani Group comprises the flagship Adani Enterprises Ltd, as well as Adani Ports and Special Economic Zone Ltd, Adani Power Ltd, Adani Green Energy Ltd and Adani Transmission Ltd.