GQG invests Rs15,446 crore in Adani group; what it means?

A leading boutique investing company, GQG partners has invested a total sum of Rs. 15,446 crore in Adani group companies. The investment was spread across four Adani group companies viz. Adani Enterprises Ltd, Adani Ports and SEZ Ltd, Adani Transmission Ltd and Adani Green Energy Ltd. The table below captures the total investment made by GQG Partners in each of the Adani group companies.

Data Source: Adani Group press release

The heavy buying by the foreign portfolio investors was already evident in the number of block deals during the day and the huge gross figure of FPI investments on 02nd March 2023 at Rs20,596 crore and the net FPI inflow at Rs. 12,771 crore. Nearly 75% of the gross FPI buying on 02nd March 2023 was purely accounted for by the purchase of GQG Capital in the Adani group stocks. The table below captures the net FPI buying of Rs. 12,771 crore on 02nd March along with the gross buying and selling figures.

Data Source: NSE

The big question that arises what explains this enthusiasm by GQG to buy into Adani stocks, especially in the backdrop of the Hindenburg report? Also, the real question is what does this investment really mean for the Adani group. First, a quick background of GQG.

Background of GQG Partners

GQG Partners is a global boutique investment company that is predominantly in emerging markets like India. In India, it already has substantial positions in the secondary markets through its investments in ICICI Bank, ITC Ltd, Reliance Industries Ltd etc. It runs core strategy funds and index funds and these purchases in the Adani group stocks are part of the core strategies fund of GQG Partners. The fund is based out of Florida, but the fund is listed on the Australian Stock Exchange. It also has offices in New York, London, Seattle, and Sydney, apart from its headquarters in Florida. GQG partners manages over $92 billion in Client Assets as of January 2023.

GQG Partners was floated by Indian born investment manager, Rajiv Jain. Incidentally, Rajiv had moved to the US in 1990 and had been working for globally reputed firm Vontobel since 1994, where rose to become the CIO (chief investment officer). He founded GQG Partners in the year 2016 to invest client funds in deep value emerging market stocks. India, China, and Brazil are the emerging markets where GQG is substantially invested in.

Why is GQG Partners investing in Adani group

According to Rajiv Jain, founder of GQG Partners, the fund sees deep value in Adani group stocks after the sharp correction seen in the last one month since the Hindenburg report was first published. For GQG, this investment is an entry into one of the biggest infrastructure franchises available in India among listed stocks. For instance, the investment in the portfolio gives GQG a share of the largest ports and airport operator in India as well as India’s largest private sector power transmission company. In addition, the investment in Adani Green Energy gives GQG participation in the largest and also the most efficient green energy capacity in India.

GQG has apparently also made a big bet on the future. This investment will allow the fund to participate in some of the biggest plans of the Adani group in the coming years which include green hydrogen, manufacture of electrolysers, data centres business, private digital networks etc. The investment allows GQG access to the present and future infrastructure plans of the Adani group as well as a share of hard infrastructure and soft infrastructure that are part of the larger Adani story.

What does this investment mean for Adani group?

For the Adani group, the investment from a globally acclaimed investment company comes as a redemption of its stance all along. Through the Hindenburg story, Adani group had maintained its stance that there was nothing for investors to be worried about. While the large global investors had held on, the passive investment indices were starting to drop the Adani group stocks from their indices. A classic example was JP Morgan dropping Adani group stocks from its ESG indices. In these circumstances, an affirmation from an active fund manager surely would add weight to the defence put up by the company.

More importantly, for the Adani group, it is an affirmation that the sharp price fall may not be exactly reflective of its inherent fundamental strengths. After all, the group still has infrastructure leadership position in power transmission, renewable power generation, green energy, ports, airports, data centres, FMCG products etc. A boutique fund investing is affirmation that the intrinsic value of the group is still intact. If anything, the sharp fall in price has only provided eager investors with a more reasonable entry point.

For the Adani group, this is part of an image refurbishing effort. Since the Hindenburg report was published on 24th January 2023, The Adani group had lost nearly $140 billion in market cap. In the last 3 days, there has been a sharp revival in the prices and in the market value of most of the major Adani group companies. In the last couple of weeks, the Adani group has also repaid loans worth Rs. 12,000 crore to mutual funds, especially where shares have been pledged. This effort will not only give comfort to investors and rating agencies over debt levels, but also reduce volatility due to stock pledging. For the Adani group, this deal does look like a win-win situation.