GQG Partners takes a $1.9 billion stake in the Adani Group
An American wealth manager specializing in emerging markets just rushed to the rescue of an embattled Indian tycoon accused of fraud.
Florida-based GQG Partners bought a total $1.9 billion stake in Gautam Adani’s eponymous group of energy and infrastructure companies, which Hindenburg Research accused in January of what may be the “biggest corporate fraud in history.” have.
Secondary market trading doesn’t raise capital directly, but it could go a long way in fueling dwindling confidence in the 60-year-old business tycoon, once the world’s second richest person.
Adani Group CFO Robbie Singh called it a “groundbreaking” deal that demonstrates “the continued confidence of global investors in the industrial conglomerate’s governance, management practices and growth.”
Rajiv Jain, chairman and chief investment officer of GQG Partners, went so far as to personally endorse the group’s ailing patriarch.
“Gautam Adani is widely regarded as one of the finest entrepreneurs of his generation,” Jain said in a joint statement.
GQG acquired small stakes in four different Adani companies ranging in size from 2.5% to 4.1% Companies that own and operate the largest airport and port in India, among other assets.
The largest single investment was the $662 million purchase of shares in Adani Enterprises, the group’s flagship company, which aims to help India become more economically independent.
“Adani companies own and operate some of the largest and most important infrastructure assets across India and around the world,” added Jain.
Who is Rajiv Jain?
Born and raised in India, Jain moved to the United States in 1990 to pursue a Masters in Business Administration from the University of Miami.
After joining Bank Vontobel’s New York wealth management arm as a portfolio manager, Jain was appointed Chief Investment Officer in January 2002. He grew the business from less than $400 million in assets under management (AUM) at the time to nearly $50 billion when he left in 2016.
Rajiv Jain is everything Cathie Wood is not https://t.co/AJiOQNGYA2
— Bloomberg (@business) February 22, 2023
He played such an important role for the Swiss bank that its shares collapsed the day it was announced that Jain was leaving to start his own business.
“Put simply, Rajiv Jain was the face of Vontobel’s wealth management in New York,” said an analyst at Zürcher Kantonalbank at the time, downgrading the stock.
The star mutual fund manager was described in a profile by on February 23 Bloomberg as “everything Cathie Wood isn’t”.
What is GQG Partners?
In June 2016, Jain co-founded GQG Partners with Tim Carver. Within a year, the duo had already been put in charge of $5 billion.
Although Jain is not a household name like ARK Invest’s Wood, he used his contact list to quietly build a firm with $92 billion in assets under management in late January.
While it is headquartered in Florida hotspot Ft. Lauderdale, the company chose to list its shares in Australia in October 2021, a resource-intensive stock market known for catering to mining and energy companies such as BHP Billiton and Rio Tinto and their investors.
The fund management company specializing in emerging markets currently has a market capitalization of AUD 4.23 billion or USD 2.9 billion.
In January, Jain informed clients that his firm’s investment portfolio was underweight the US technology sector, a Wood’s favorite.
“With high sales expectations but shrinking IT budgets, returns in this space could be disappointing,” he wrote, warning of a “bleak earnings outlook” that doesn’t bode well for investors.
What was the reaction to GQG’s decision to invest in Adani?
Hindenburg Research by Nate Anderson, a short seller best known for exposing the Nikola Motors fraud, accused the Indian conglomerate of decades of corporate wrongdoing, allegations the group has denied.
This nonetheless did not prevent nearly $120 billion in value from his seven publicly traded companies being erased virtually overnight, with Gautam Adani’s personal fortune collapsing in the process.
We believe the Adani Group was able to pull off a massive, flagrant scam in broad daylight, in large part because investors, journalists, citizens, and even politicians were afraid to speak out about the obvious for fear of reprisals. (54/x)
— Hindenburg Research (@HindenburgRes) January 25, 2023
Earlier last month, Adani was forced to postpone a fully subscribed capital increase that would have raised $2.5 billion for its companies. Shortly thereafter, the company halved its growth target and scaled back investment plans to conserve cash.
Amid the controversy surrounding the company, GQG Partners has reached out to clients to explain the rationale for investing in such potentially risky assets Reuters.
“There is a very high level of skepticism about what this stake means, whether they understand the risk they are taking,” said Jun Bei Liu, manager of the Tribeca Alpha Plus Fund.
GQG Partners shares fell 3% on Friday, underperforming the broader Australian stock market after the news.
In conversation with Bloomberg Conducted just days before the investment, Jain downplayed the allegations against Adani as “a lot of hot air” and dismissed the idea that the conglomerate could be the biggest scam in India since Satyam Computer Services over a decade ago.
“These are regulated assets, you can check a lot of these revenue streams from other places,” he said on Feb. 23. “So I think this isn’t Enron or Satyam.”
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