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Adani-Hindenburg row: GQG chief Rajiv Jain explains why he put Rs 15,000 crore in Adani block deal

Adani-Hindenburg row: GQG chief Rajiv Jain explains why he put Rs 15,000 crore in Adani block deal

Rajiv Jain, Chairman of GQG Partners said in an interview that they didn’t pick and choose. He also said that not only Adani, the firm bought into Infosys when it was reeling under whistleblower allegations.

Rajiv Jain on GQG's Rs 15,000 crore investment in Adani Rajiv Jain on GQG's Rs 15,000 crore investment in Adani

US boutique investment firm GQG Partners has invested Rs 15,446 crore in four Adani Group companies Adani Ports and Special Economic Zone, Adani Green Energy, Adani Enterprises Ltd and Adani Transmission at a time when the conglomerate is in its deepest crisis ever. After Hindenburg’s damning report on the group, its listed companies saw a massive erosion of m-cap. Rajiv Jain, Chairman of GQG Partners said in an interview that they didn’t pick and choose. He also said that not only Adani, the firm bought into Infosys when it was reeling under whistleblower allegations, as well as Brazilian state-backed firm Petrobras that’s been under a lot of scrutiny.

In an interview to The Economic Times, Jain said that they thought a secondary offering was better than a primary offering.

Here’s what Jain said about the Rs 15,000 crore investment in Adani block deal:

  • “That's frankly not our decision. That was their decision. So, we didn't pick and choose. But from a structuring perspective, we thought it's better to sort of buy directly from the promoter family,” said Jain adding that secondary is faster and more efficient.
  • He said that the way the stock was moving, they knew it wouldn't last forever. The faster a stock declines, the sooner the decline would end, said Jain at the interview. In six months, the stock might not be as attractively priced, said Jain.
  • Rajiv Jain said that not only Adani, there have been other instances too when they were aggressive during a decline. He gave examples of buying after the 2004 elections when the whole market declined 25 per cent. In 1996, ITC faced a crisis due to a tax situation, which they bought into and owned for 20 years.
  • “So, crisis usually creates opportunities. But to be clear, I've got some crises dead wrong,” said Jain in the Economic Times interview.
  • Jain also gave examples of the Infosys whistleblower crisis from 2019, after which the stock dropped by 30-45 per cent. But people forget, he said. He also said that they bought Petrobras very aggressively in the past two years.
  • He said utility-type businesses are “unique animals” and “tend to have a very long tail”. If they grow they will have negative free cash flow because they get paid on their capex. He said lot of folks don’t understand “how this game is played on the utility side”.
  • Debt to EBITDA for most Adani companies on an average is around three times. Meanwhile, US utilities have debt to EBITDA of around 6-6.5 times. “Because of the stability and the long tail, these utility businesses can afford to have high debt. If you are a cyclical business, you should not be levered. In fact, in a regulated business you are required to be levered. There's nothing like a debt-free, regulated utility,” he said.
  • He said a little slowdown is fine. Jain said that India needs someone who can execute its infrastructure requirements. He said that Adani is running the Mumbai airport and its power transmission and distribution company fine.
  • Jain also said that they did a lot of due diligence with people who have worked with the Adani Group before to get a sense of the culture of the place. “And, we felt very comfortable how the group has done,” he said.
  • Rajiv Jain said that people were concerned with the investment, but they have talked a lot to their investors. He said that GQG continues to talk to their investors.
  • “Why is it that the Adani family owns 65-75% of these businesses and they built this empire. It’s because of their strong cash flow generating capabilities. They are actually not issuing equity that much and have been rather stingy about it. We like that,” he said.
  • Jain said that he did not know Gautam Adani or his brother, Vinod Adani from before. He said that some facts should not be lost in the middle of the controversy – that the Adanis were handed nothing on a platter. Jain, however, said that he does not deny the allegations of political connections.
  • He said that he has heard similar stories about Reliance for 25 years now. He said such stories come and go but they don’t base their affiliations on politics. Markets, at the end of the day, is about dollars and cents, Jain said.

Also read: Adani block deals: Who is GQG Partners' Rajiv Jain, the man who bought Adani shares worth Rs 15,446 cr

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Published on: Mar 06, 2023, 12:59 PM IST
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