U.S. boutique investment firm GQG Partners Inc has bought shares worth $1.87 billion in four Adani group companies, marking the first major investment in the Indian conglomerate since a short-seller's critical report sparked a stock rout.
Seven listed Adani companies have lost some $135 billion in market value since Jan. 24, when Hindenburg Research accused it of improper use of offshore tax havens and stock manipulation. The group, led by billionaire Gautam Adani, denied the allegations. It later called off a $2.5 billion share sale.
The investment also comes on a day when India's top court asked market regulator SEBI to investigate the group for any lapses related to public shareholding norms or regulatory disclosures.
The group has been trying reassure investors with road shows and calls with bond holders. According to sources, Adani has told creditors it has secured a $3 billion loan from a sovereign wealth fund.
U.S.-based, Australia-listed GQG has, through block deals, bought shares worth 154.46 billion rupees in four Adani group companies, including the conglomerate's flagship firm Adani Enterprises (ADEL.NS), a regulatory filing showed. The shares were sold by an Adani family trust, using Jefferies as a broker.
Based in Fort Lauderdale, Florida, GQG manages $88 billion in assets, in global, U.S. and emerging markets equities funds.
In early Australian trade, GQG Partners shares were down 2.3% while the S&P/ASX200 was up 0.4% on Friday.
"We believe that the long-term growth prospects for these companies are substantial," said Rajiv Jain, GQG's chairman and chief investment officer, adding the firm's investments take into account a five-year horizon. Before founding GQG, Jain spent 22 years at Vontobel Asset Management.
GQG took a 3.4% stake in Adani Enterprises for about $662 million, 4.1% in Adani Ports for $640 million, 2.5% in Adani Transmission for $230 million, and a 3.5% stake in Adani Green Energy for $340 million, according to the filing.
Jain said that as an investor in infrastructure companies, he has been following Adani for six years. "Our view was that these assets would not be low forever," he told Reuters.
Before investing, Jain said GQG did a "deep dive on our own" as part of due diligence, including conversations with the group's vendors, bankers and partners. "We actually disagree with (Hindenburg's) report," he said, adding that infrastructure companies are subject to tight regulation and therefore the risk of fraud is low.
Jefferies approached GQG about the deal roughly five weeks ago, when its senior leadership was in Miami, two sources familiar with the matter said. Jefferies has been working with GQG for years and understands its investment style, one of the sources added.
"This transaction marks the continued confidence of global investors in the governance, management practices and the growth of Adani Portfolio of companies," said Adani Group CFO Jugeshinder Singh.
In the run-up to the announcement, Adani group shares rallied, with Adani Enterprises (ADEL.NS) climbing nearly 35% over the last three sessions, Adani Ports (APSE.NS) 11% and Adani Green Energy (ADNA.NS) 16%. Adani Transmission (ADAI.NS) rose 10% in the previous two sessions.
"For the short-term, this will definitely be a big positive for the sentiment for Adani stocks," said Avinash Gorakshakar, head of research at Profitmart Securities.
"But in the longer term, the market is going to look at how growth is going to come."
Jefferies India was the sole broker for GQG's transaction. ($1 = 82.5180 Indian rupees)
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