India

Adani Shares Rally After $1.9-Billion GQG Stock Buy-up

The Adani Group is looking to allay fears about its "precarious debt level", alleged in Hindenburg Research's recent report, which caused the group's market value to be cut in half. File photo: Reuters.

Adani shares shot up on Friday after GQG Partners announced a $1.9-billion investment in the group.

Adani Enterprise stock was up nearly 16% on Friday, while Adani Ports rose by close to 10% and other listed entities surged by at least 5% near the close of trading, as concern eased about the group’s ability to attract funding.

The conglomerate has also lined up more roadshows to shore up investor confidence.

Stake purchases by the US boutique investment firm comprised the first major investment in billionaire Gautam Adani’s conglomerate since a short-seller’s critical report resulted in seven of the Indian group’s listed firms losing more than $130 billion in market value.

In the January 24 report, New York-based Hindenburg Research noted high debt and alleged improper use of offshore tax havens and stock manipulation – which Adani denied. A dive in Adani stocks then prompted the group to shelve a $2.5-billion share sale.

GQG’s deal “may assuage concerns about the group’s ability to raise funding for the repayment of loans against its listed company shares,” analysts at Kotak Institutional Equities said.

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Roadshow to boost investor confidence

Meanwhile, Adani will hold fixed-income roadshows this month in London, Dubai, and several cities in the United States, a document showed, as the conglomerate tries to boost investor confidence.

The meetings are scheduled for Dubai on March 7, London on March 8, and several US locations between March 9-15, the document showed.

Adani did not immediately respond to a request for comment.

Earlier this week, sources said Adani has told creditors it has secured a $3-billion loan from a sovereign wealth fund. On Thursday, India’s top court asked market regulator SEBI to investigate the group for any lapses related to public shareholding norms or regulatory disclosures.

Overall, Adani group firms’ net debt totalled $24.1 billion as of September 2022.

‘A boost after widespread selling’

“The stake buying yesterday was a good market booster for Adani Group stocks which have seen a long spell of underperformance and widespread selling,” Avinash Gorakshakar, head of research at Profitmart Securities, said.

Adani firms said on Thursday that GQG had bought 3.4% of Adani Enterprises for about $662 million, 4.1% of Adani Ports and Special Economic Zone for $640 million, 2.5% of Adani Transmission for $230 million, and 3.5% of Adani Green Energy for $340 million.

GQG’s Sydney-listed shares ended Friday down 3% versus a 0.4% rise in the benchmark share price index.

GQG chairman and chief investment officer Rajiv Jain said the Florida-based firm had carried out its own “deep dive” into Adani and disagreed with Hindenburg’s report.

“Based on past comments of Rajiv Jain, he is the type of investor that goes for wherever there is unrealised value,” Morningstar analyst Shaun Ler, who covers GQG Partners, said.

“He does not explicitly run an ESG fund, and importantly, his investors are well aware of that,” he said, in reference to GQG buying into Adani, which has major coal assets and so would not fall under the environmental, social and governance banner.

“There will be people who avoid buying GQG due to Rajiv’s decisions; there will also be those who want to invest with them given their good performance.”

GQG stock is up 3.58% so far this year, in line with the benchmark index.

Jain is founder, chairman and chief investment officer at GQG. He also serves as portfolio manager for all of its strategies, according to his profile on GQG’s website.

GQG listed on Australia’s stock exchange in October 2021, raising A$1.18 billion ($794.97 million), making it Australia’s largest listing for the year. Jain retains a 68.8% stake.