Level of exposure in Adani group stocks ‘manageable’: GQG
GQG Partners, a US-based investment boutique and a major backer of the Adani Group, said in a memo that it does not see US actions having a "material" impact on Adani businesses.
“We believe this level of exposure is manageable, even given the volatility in Adani Group stocks,” said GQG.
However, the American investment firm added that it would remain diligent in re-underwriting its positions and examining any new facts.
GQG's holdings in Adani Group companies dropped from $9.7 billion on November 19 to $8.1 billion on November 21, now representing 5.2% of its total assets of $156.7 billion, as per the memo.
The investment management company, however, has reportedly downplayed the indictment, stating that it targets individual employees rather than the company itself. The allegations pertain to only one of the Adani Group’s subsidiaries, Adani Green. The company noted that such regulatory probes often span years and frequently result in reduced penalties, citing numerous examples of global companies and executives facing similar charges.
With a total asset base of $158.6 billion, the Florida-headquartered company has approximately 6.1% of its portfolio invested in Adani Group companies. The firm has claimed in a memo that, as of November 21, its Adani investments have delivered positive aggregate returns and foresees no material impact from the US SEC’s actions on Adani businesses. Further, the company has reportedly argued that the Hindenburg allegations are unrelated to the charges outlined in the SEC indictment.
GQG highlighted that, apart from Adani Green, the group’s companies currently do not require additional capital. The firm has stated in an internal memo that it remains committed to "re-underwriting its positions and examining any new facts," emphasising its diligence in managing risks. Despite market volatility, GQG maintains that its exposure to Adani stocks remains manageable.
GQG Partners, led by CIO Rajiv Jain, adopted a bold strategy in 2023 by allocating nearly 20% of its $33.6 billion Emerging Markets Equity Fund to Adani Group companies that too post the Hindenburg Research’s allegations.
In its 2023 annual report, Jain defended the move as a prime example of GQG’s "differentiated thinking," citing the investment as a strategic play on undervalued assets amidst negative media coverage. Initially, the strategy paid off, helping the Emerging Markets portfolio outperform its benchmark by 21%. However, recent developments have shifted the narrative, raising concerns over the firm’s heavy exposure to Adani.
The fallout from the US indictment of Gautam Adani, chairman of the Adani Group, and seven associates has severely impacted GQG Partners. Recently, US prosecutors accused Adani and his associates of orchestrating a $250 million bribery scheme to secure government contracts, including India’s largest solar power project. This indictment, released by the US SEC, adds to earlier concerns raised by Hindenburg Research in 2023, which accused the Adani Group of accounting fraud and stock manipulation.
The news triggered a sharp sell-off in GQG Partners' shares on the Australian Securities Exchange, with the stock plunging over 23% to AUD 2.03 last Thursday, marking its worst trading day since its 2021 listing.
In response, GQG Partners earlier acknowledged the severity of the situation in an ASX filing, stating that it is "reviewing the emerging details and determining what, if any, actions for our portfolios are appropriate."