<https://open.substack.com/pub/kbssidhu/p/dirty-dozen-questions-for-indias> Courtesay
What is LIC’s total look-through exposure to the Adani Group—today and over time? Publish a consolidated table of all investments (debt, equity, hybrids, structured products, guarantees) across every LIC portfolio, naming each Adani entity and instrument, original cost, current market value, coupon/dividend, maturity, collateral, unrealised gains/losses, and share of LIC’s total assets. Provide the same series quarterly from January 2023 to date.
How does that exposure sit against board-approved and regulatory limits by single issuer, group and sector? State the relevant limits and actual utilisation before and after the 30 May bond, and disclose any temporary waivers—who approved them, when, for how long and on what rationale. Include look-through adjustments for holding companies and common-control entities.
Where are the comparables? Over the last 24 months, how many non-Adani issuers with the same Indian credit rating received similarly large allocations on similar tenors and at similar or better yields? List issuer, tenor, rating agency and outlook, coupon, spread to G-sec, allocation percentage and the sizing justification. Without comparables, “ordinary course” is an assertion, not a fact.
Did LIC know it would be the sole subscriber to the 30 May Adani Ports bond? If yes, what was the documented case for bearing 100% single-issue execution, concentration and liquidity risk? If no, what efforts were made to syndicate, at what indicated pricing, and why did they fail? Release the pricing note and bookrunner communications with counterparty names redacted.
What independent price discovery supported the allocation? Share the pricing memo benchmarking the bond against the issuer’s own curve, port-sector peers and same-rating infrastructure names, plus dealer quotes, any fairness opinions and internal model outputs. Superior yield claims require corroboration.
What diligence was done on the participation—or abstention—of other large domestic and global investors? Did LIC explicitly inquire whether mutual funds, pensions, insurers, sovereign funds or foreign institutions were bidding? If several stayed out, did LIC record the reasons (mandate limits, compliance posture, legal-risk concerns) and reflect them in the required spread?
How were legal and reputational risks modelled, given contemporaneous U.S. DOJ/SEC proceedings and ongoing Indian regulatory matters? Provide the scenarios and stress tests: spread-widening shocks, multi-notch rating migration, event-risk contingencies and idiosyncratic default. What covenants, step-ups, security or capital charges were taken to compensate for non-credit risks?
Which ratings were relied upon, and how were divergences reconciled? Publish the external ratings (agency, scale, outlook) used at decision time; LIC’s internal rating; any watchlist flags; and the policy for reconciling differences when Indian ratings sit materially above international assessments. Specify pre-agreed actions on downgrades or covenant breaches.
What is the exit and liquidity plan for concentrated single-name holdings? If the issue is not widely distributed, outline secondary-market liquidity arrangements, market-making lines, buy-back undertakings or put options. For equity, set out pre-committed dribble-out or block-trade pathways and expected price-impact under stress.
What are the implications for solvency, asset-liability matching and policyholder bonuses? Quantify the effect of Adani exposures on solvency margins and ALM buckets. If held in participating funds, detail the policyholder-versus-shareholder risk-return split. Provide the ex-ante expected return and ex-post results since purchase, including mark-to-market effects.
Show risk-adjusted returns, not just headline coupons. For the May bond and any subsequent instruments, disclose incremental yield over G-secs and peer names, and present risk-adjusted metrics (e.g., spread per unit of expected loss/volatility, or RAROC). Compare against realistic alternatives available that week—state-owned energy/infrastructure issuers, top private credits, or additional G-secs—to evidence opportunity cost.
Will LIC commit to standing transparency and independent review? Will LIC publish a quarterly schedule of top-20 group exposures (equity and debt) with rationale, risk flags and performance; and commission an independent external review of the Adani decision chain, publishing a summary report? Such transparency would set the market standard for a statutory insurer handling public money.