EPFO - Two Adani stocks have "Captive Investors" who are EPFO subscribers.

Adani Enterprises and Adani Ports & SEZ are among the Nifty 50 stocks in which EPFO invests the majority of its equity funds; these stocks have plummeted since Hindenburg Research's allegations against the Adani group.

Source: The Hindu Newspaper 26, March, 2023
Up to 85% of EPFO's equity investments are earmarked for ETFs that track the Nifry 50, which included Adani Enterprises in September 2022.

Several sizable investors may have reconsidered their exposure to the Adani group in the wake of the Hindenburg Research report. However, a sizable pool of money has persisted in investing in two Adani stocks, including the company's flagship Adani Enterprises, and will continue to do so through at least September of this year unless its trustees decide to change their approach to investing at their meeting this week.

The Employees' Provident Fund Organization (EPFO), the largest retirement fund in India, invests 15% of its corpus in exchange traded funds (ETFs) linked to the NSE Nifty 50 and the BSE Sensex. EPFO is responsible for managing the retirement savings of 27.73 crore formal sector employees.

Keeping Adani stocks

Up to 85% of the equity investments made by the second-largest non-banking financial institution after the LIC of India are allocated to ETFs that track the Nifty 50; these ETFs added Adani Enterprises in September of last year and have continued to hold the stock for another six months for the period beginning on March 30 this year.

Since September 2015, when the EPPO opened up to equity investments by investing 5% of member contributions received in the form of supplemental contributions into ETFs, the index has increased by 50 points. Following a recent review of the index by NSE Indices, a division of the NSE, the APSEZ stock has also been kept in the Nifty 50 for the upcoming six months, along with Adani Enterprises.

Savings at stake

Neelam Shami Rao, the Commissioner of the Central Provident Fund, did not respond to questions posed by The Hindu on March 23 regarding the EPFO's exposure to the stocks of the Adani group, whether or not its fund managers had received any directives to avoid making new investments in those stocks in order to protect retirees' retirement funds, and whether or not a shift away from investments based on the Nifty 50 was being considered.

The EPFO is anticipated to have invested an additional Rs. 38,000 crore in ETFs during 2022–2023 out of the fresh contributions totaling an estimated Rs. 2.54 lakh crore received into EPF members' accounts. As of March 2022, the EPFO had Rs. 1.57 lakh crore invested in ETFs.

Trustees unaware

When contacted by The Hindu, trustees of the EPFO stated that they were unaware of the organization's exposure to Adani shares; nevertheless, the matter may come up at a two-day board meeting that would be presided over by Union Labour and Employment Minister Bhupender Yadav and start on Monday.

At the board of trustees meeting, it is anticipated that the EPFO's investment income for this year and the interest rate to be paid to members will be discussed. The EPF rate dropped to a 45-year low of 8.1% last year.

declining returns

According to a government official, because it has only recently started investing in Adani Enterprises, its exposure to the company's flagship stock is significantly lower than its overall exposure to APSEZ shares over the years. In September 2016, EPFO increased its equity exposure to 10% of new inflows, and in May 2017, it increased it further to 15%.

The investments EPFO has made in Adani, however, will reduce its returns on investment and may have an impact on the annual EPF rate paid to its members given the sharp decline in the price of Adani stocks since January 24.

58.5% lower than its 52-week high level of Rs. 4,190, attained in December 2022, the Adani Enterprises stock was down nearly 49% from the price levels at which it was listed in the NSE Nifty 50 as of March 24. The price of APSEZ stock has dropped nearly 19% since the start of 2022–2023 and is now more than 35% below its 52–week high of Rs. 987.8, set in September 2022.

SOURCE: The Hindu Newspaper, 26, March(Article by VIkas Dhoot)