Towards the end of January 2023, a report by US-based short seller Hindenburg Research, which claimed the Adani Group had engaged in stock manipulation and accounting fraud, sent the shares of the airports to fast moving consumer goods conglomerate tumbling. The sell-off continued well into February as investors in these companies worried over the fallout of the allegations and any regulatory investigations rushed through the exit door.
But, the stocks, which were among the major losers in February, are now among the major gainers in March. On Monday, the Adani group flagship Adani Enterprises rose over 4.4 per cent and trade at Rs 1,962.15 in the afternoon. Adani Wilmar, Adani Green, Adani Power, Adani Transmission, Adani Total Gas and NDTV, all hit the 5 per cent upper circuit limit. Adani Ports and SEZ was also trading in the green. Cement companies ACC and Ambuja were the only two group stocks in the red.
Monday's gains in Adani Group stocks are not a one-off. Adani Enterprises has surged over 70 per cent in the last five sessions. Adani Wilmar, Adani Power, Adani Green and NDTV rose over 30 per cent in the same period. Adani Total Gas, Adani Transmission, ACC and Ambuja Cements also rose between 11-21 per cent.
What triggered a comeback among Adani Group stocks was its deal with boutique investment firm GQG Partners on March 2. Through a serious of block deals on the stock market, GQG Partners invested Rs 15,446 crore or around $1.87 billion in four Adani Group stocks - Adani Green, Adani Ports, Adani Transmission and Adani Enterprises.
Of the total investment, Rs 5,460 crore would go to Adani Enterprises, Rs 5,282 crore in Adani Ports, Rs 1,898 crore in Adani Transmission and Adani Green would get Rs 2,806 crore.
This investment calmed nervous investors as it came at a time the Supreme Court set up an expert committee to review the regulatory mechanisms in the wake of the allegations made by Hindenburg against the Adani Group. Market regulator SEBI would also have to probe whether there was any manipulation of stock prices and if there was a failure to disclose related party transactions among other things.
Amid such uncertainty, here was a global fund manager willing to bet on the Adani Group.
Why did the investment firm invest in the Adani Group companies? Rajiv Jain, the chairman and chief investment officer (CIO) of GQG Partners pointed that Adani companies owned and operated some of the largest and most important infrastructure assets and he believed that the long-term growth prospects for these companies were "substantial."
Naveen Kulkarni, chief investment officer at Axis Securities, feels the investment would create a floor for Adani Group stocks since a marquee investor was investing in these companies.
"The investment leads to a belief that the Adani Group stocks have stabilised and can raise capital if they want at current prices," said Kulkarni.
He further felt that the promoters could use the money raised to infuse capital in any group company through instruments like warrants and rights issue.
Listed on the Australian Stock Exchange, GQG Partners managed around $92 billion in client assets as of January 31, 2023 through various funds. ICICI Bank, State Bank, ITC, HDFC and Reliance were among some of the Indian stocks it had held in its Emerging Markets Equity Fund.
In an interview with a financial daily, Jain of GQG pointed out that there had been instances in the past too where it had been aggressive in market declines like after 2004 elections. It bought into Infosys in 2019, when the the stock had tanked post a whistle blower complaint.
GQG's investments in Adani Group companies seem to be a long-term bet on India's infrastructure story. The investment may have lifted the Adani Group shares for now. However, the regulatory overhang does remain and all eyes will be on the investigation by SEBI and the Supreme Court appointed committee.
