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LIC's Rs 5,000 Crore Adani lifeline: Is public money being used for crony capitalism?

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02nd June, 2025 10:13 IST

The Life Insurance Corporation of India’s (LIC) decision to fully subscribe to Adani Ports’ recent Rs 5,000 crore bond issue has set off a firestorm of criticism, intensifying public concern over the opaque intersection of state policy, public sector investments, and corporate debt.

With no other institutional investors showing interest in the issue, LIC stepped in as the sole buyer—prompting accusations of coercion, cronyism, and reckless endangerment of policyholders’ funds.

This development comes at a time when faces mounting scrutiny from international watchdogs and is already burdened with substantial debt exposure. Critics argue that LIC’s move resembles less an investment decision and more a bailout disguised in financial respectability.

The most scathing reactions have come from civil society and political voices who see this as yet another example of public institutions being used to shield powerful corporate allies of the government.

“Adani issued bonds worth Rs 5,000 crore, and when no one came forward to buy them, LIC used citizens’ money to scoop up the entire issue,” said one angry commentator. “If Adani Group collapses under its debt mountain, who will answer for the losses suffered by LIC policyholders?”

Another critic went a step further, accusing the conglomerate of treating government institutions as its “piggy bank,” and questioned the silence of opposition parties: “How can they let LIC, which handles public money, accept a bond with just a marginal 50 basis points above standard fixed deposit interest—without any participation from other financial institutions?”

Top brass at LIC, however, offered a robust defence. “Our investment in Adani Group companies surged by 59 per cent in FY 2023–24,” said a senior official. “It rose from Rs 38,471 crore to Rs 61,210 crore within a year—a gain of Rs 22,378 crore.” LIC further contended that the 15-year bond carries an annual interest of 7.75 per cent, which they see as a long-term value proposition.

But critics remain unconvinced, pointing out that the return is not commensurate with the risk. “7.75 per cent for a non-convertible debenture (NCD) with no other takers is not a lucrative offer—it’s a red flag,” said a retired banking analyst. “If the market isn’t biting, should a public insurer step in as the only buyer?”

Beyond the financial prudence of the deal, the broader concern is systemic: are public financial institutions being pressured into propping up select industrial empires closely aligned with the ruling regime?

“The Modi government’s brazen cronyism has pushed LIC to act as a backstop for Adani,” said a political analyst. “Public sector banks have already sunk Rs 94,400 crore into the group. Now, LIC is being used as a safety net when international confidence is clearly eroding.”

Adding to the unease is the context of global investigations. Adani Group has been named in fraud and bribery allegations by US prosecutors. Despite this, Indian public institutions continue to expand their exposure to the group.

Observers warn that the issue is not simply about one investment decision. “This is not how legitimate democracies function,” said a governance watchdog. “There must be accountability. The 'Chowkidar' appointed to safeguard public resources appears indifferent, if not complicit. We’re frogs in boiling water—by the time it’s too late, there’ll be no way to undo the damage.”

The Rs 10,812.5 crore LIC expects to receive in 15 years may look reassuring on paper. But sceptics argue the actual risk lies in what happens if Adani’s debt-fuelled growth model collapses. Without a diversified investor base and in an era of rising global regulatory scrutiny, such exposure may not only prove economically disastrous but politically explosive.

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