'Totally nonsensical': GQG's Rajiv Jain on MSCI reducing weight on Adani stocks based on Hindenburg report

GQG Partners Chief Investment Officer Rajiv Jain said on Tuesday that it was "totally nonsensical" that MSCI excluded two Adani firms from its India gauge based on an US short seller's report.

In an interview with BQ Prime, Jain said: "If others don't invest, it doesn't bother me. In fact, I like the fact some indexes are underselling because that allowed us to buy some stuff, right? I mean, that's as close to dumb money as it gets. I mean, I don't understand a short seller writes a report, why is MSC reducing weightage in indices there? Some of this is totally nonsensical. but look, if people weren't doing stuff like that, we won't get an opportunity to buy either."

Earlier this month, MSCI announced that Adani Total Gas Ltd and Adani Transmission Ltd will move out of the MSCI India Index with effect from May 31.

Adani Group has been battling the fallout from the scathing Hindenburg Research report, in which the short seller levelled allegations of fraud and stock manipulation against the Gautam Adani-led conglomerate.

MSCI Global Standard Index is widely used by global fund houses for benchmarking global equities portfolios.

GQG Partners has raised its stake in Gautam Adani's conglomerate by about 10% and will take part in the group's future fundraising, the U.S. investment firm said on Tuesday.

Although the company did not disclose the total value of its stake in its statement, GQG Chief Investment Officer Rajiv Jain told Bloomberg News that the figure was close to $3.5 billion.

"Within five years, we would like to be one of the largest investors in Adani Group depending on the valuation, after the family," Jain told Bloomberg.

Jain, who said that Adani has the "best infrastructure assets available in India," did not specify which companies GQG had bought into in its latest investment. 

In March, GQG Partners invested $1.87 billion in four Adani firms, including flagship unit Adani Enterprises and made over 60% gains within three months. 

Jain spoke about his investment rationale in Adani firms.

"Adani is kind of unique because they are in a very strong investment phase even now. And what we've seen, for example, in ports and ports is a very good sort of a case study that after certain years you will see a hockey stick of earnings come through. The infrastructure assets have a very long tail. The returns are regulated by the government most of the time. After the initial setup, you can get very steady returns. So, to grow you need to keep investing more capital, so they are always free cash flow negative. So, they're always free cash flow negative, but you get very high returns, on a long-term basis," said Jain.

He said he was "not exactly surprised" with the Supreme Court panel's report on the Adani-Hindenburg row. 

"...They got complete clean chit," Jain said adding, "a lot of things that are being investigated have been investigated before," he said. "It has kind of become a political football more than real economics, substantive issue."

A Supreme Court-appointed panel found no evidence of stock price manipulation in the Group companies.