The Rs 15,446 crore block deal on Thursday seems to have changed the fortunes of Adani Group stocks, at least for the time being. A day after the deal, all group companies gained over Rs 70,000 crore in market capitalisation.
And the man behind the turnaround in fortunes — Rajiv Jain, chairman and CIO of $92 billion GQG Partners — must be happy to have waited for the opportunity for five years. He is already sitting on a 20% profit in a single day. That is, his Rs 15,446 crore investment has risen to Rs 18,574 crore. Of course, he bought the shares at a discount of between 2.5% and 5.7%.
In his own words: He couldn’t get into the Adani counter because they were in ‘no man’s territory’. So, Hindenburg’s scathing report on Adani Group came as a blessing in disguise for his funds. And he went all out with a $1.9 billion buy through his two funds: Emerging Markets Equity Fund and International Opportunities Fund.
Jain, the founder of GQG, told the Australian Financial Review (AFR) that the ensuing crash in stock prices gave him the opportunity to “snap up fantastic assets at an attractive price”.
“They have their view, and we have ours, and we happen to disagree with their view, but that’s what makes a market,” Jain told AFR. “A lot of governments have come and gone in that period. Frauds typically don’t last 30 years — three months, three years, maybe, but not 30 years.”
Describing Adani Group’s airport, port, and energy assets as “fantastic”, “irreplaceable”, and available at a good price, he said: “About 25% of India’s air traffic passes through their airports and 25-40% of India’s cargo volume through their ports.”
He was also upbeat about Adani Green, saying: “Adani Green Energy
Since the Hindenburg report on January 24, the price-to-earnings for Adani Enterprises
Jain founded GQG Partners in 2016 and manages the portfolio for all GQG Partners strategies, shows his LinkedIn profile.
As of December-end, Emerging Markets Equity Fund’s top 10 holdings included ITC (6.5% of total portfolio), Housing Development Finance Corporation (5.1%), Reliance Industries (4.2%), ICICI Bank (2.9%) and State Bank of India (2.8%) in its top 10 holdings. Indian companies make up 34% of the GQG emerging markets fund.
A Bloomberg report said that the $26-billion ‘Goldman Sachs GQG Partners International Opportunities Fund’, which happens to be GQG’s biggest fund, has gained 10.8% a year — more than double the benchmark’s 3.9% annual return — since December 2016.
The International Opportunities Fund, which is run with Goldman Sachs, has only one Indian company in its top 10 holdings: HDFC. It has 7.8% exposure to Indian companies.
According to reports, Jain invests in 40-50 large-cap stocks in his international fund, in a contrast to the benchmark’s more than 2,000 companies. His US fund holds less than 30 stocks, compared to over 500 in the S&P index.
Jain’s investment style, as articulated by him in one of his interviews, is a bottom-up approach. He seeks companies that can sustain earnings growth over the long run and are available for reasonable prices. He also believes in buying consistent companies that capture a portion of the growth when markets are going up and provide some protection when they decline. It will be interesting to see the way his Adani bets go. But for now, he and his investors would be quite thrilled.