An American money manager specializing in emerging markets just rode to the rescue of an embattled Indian tycoon accused of fraud.
Florida-based GQG Partners amassed a $1.9 billion overall stake in Gautam Adani’s eponymous group of energy and infrastructure companies, accused by Hindenburg Research in January of committing what may be the “largest corporate fraud in history”.
The secondary market trade doesn't raise capital directly, but it could go a long way in shoring up flagging trust in the 60-year-old business magnate, once the world’s second richest person.
Adani Group finance chief Robbie Singh hailed it as a “landmark” deal that demonstrates “the continued confidence of global investors in the governance, management practices and the growth” of the industrial conglomerate.
Rajiv Jain, chairman and chief investment officer of GQG Partners, went so far as to personally give his stamp of approval in the group's beleaguered patriarch.
“Gautam Adani is widely regarded as among the best entrepreneurs of his generation,” Jain said in a joint statement.
GQG took small interests in four different Adani companies ranging in size between 2.5% to 4.1% companies, which among other assets own and operate the largest airport and port in India.
The largest single investment was $662 million purchase of shares in Adani Enterprises, the group’s flagship tasked with helping India become more economically self-reliant.
“Adani companies own and operate some of the largest and most important infrastructure assets throughout India and around the world,” Jain added.
Who is Rajiv Jain?
Born and raised in India, Jain moved to the United States in 1990 to pursue a master’s in business administration at the University of Miami.
After joining the New York-based asset management arm of Bank Vontobel as portfolio manager, Jain was appointed chief investment officer in January 2002. He went on to build the business from less than $400 million in assets under management (AUM) at the time to nearly $50 billion by the time he left in 2016.
Rajiv Jain is everything that Cathie Wood isn’t https://t.co/AJiOQNGYA2
— Bloomberg (@business) February 22, 2023
He played such a key role for the Swiss bank that its stock collapsed the day it disclosed Jain was quitting to go into business for himself.
“Put simply, Rajiv Jain was the face of Vontobel asset management in New York,” an analyst with Zuercher Kantonalbank said at the time, downgrading the stock.
The star investment fund manager was described in a Feb. 23 profile by Bloomberg as “everything that Cathie Wood isn’t”.
What is GQG Partners?
In June 2016, Jain went on to co-found GQG Partners together with Tim Carver. Within a year, the duo were already entrusted with managing $5 billion.
Despite not being a household name like ARK Invest’s Wood, Jain used his list of contacts to quietly build a firm with $92 billion in AUM as of the end of January.
While it is headquartered in Florida hotspot Ft. Lauderdale, it chose in October 2021 to list its shares in Australia, a resource-heavy equity market well known for catering to mining and energy companies like BHP Billiton and Rio Tinto and their investors.
The fund management firm, which specializes in emerging markets, currently has a market cap of AUD$4.23 billion, or $2.9 billion.
In January, Jain informed clients his firm's investment portfolio underweighted the U.S. tech sector, a favorite of Wood’s.
“With lofty sales expectations but slowing IT budgets, returns in that space could be disappointing,” he wrote, warning of a “murky outlook for earnings” where the odds are not favorable to investors.
What was the reaction to GQG's decision to invest in Adani?
Nate Anderson’s Hindenburg Research, a short seller best known for unveiling the fraud at Nikola Motors, accused the Indian conglomerate of decades of corporate malfeasance, allegations the group has denied.
This has nonetheless failed to prevent nearly $120 billion in value erased from its seven listed firms practically overnight, with Gautam Adani’s own personal fortune tumbling in the process.
We believe the Adani Group has been able to operate a massive, flagrant fraud in broad daylight in large part because investors, journalists, citizens and even politicians have been afraid to speak out about the obvious, for fear of reprisal. (54/x)
— Hindenburg Research (@HindenburgRes) January 25, 2023
Early last month Adani was forced to shelve a fully-subscribed equity hike that would have raised $2.5 billion for his companies. Shortly thereafter it halved its growth target and scaled down capital expenditure plans in an effort to conserve cash.
Given the controversy surrounding the company, GQG Partners reached out to clients to explain the rationale of investing in such potentially risky assets, according to Reuters.
“There’s a very high level of scepticism about what that stake means, whether they’ve understood the risk they’re taking on,” said Tribeca Alpha Plus Fund manager Jun Bei Liu.
Shares in GQG Partners slid 3% on Friday, underperforming the broader Australian equity market, following the news.
In an interview with Bloomberg conducted only days before the investment, Jain downplayed the charges leveled at Adani as “a lot of hot air”, and dismissed the idea the conglomerate may be the biggest case of fraud in India since Satyam Computer Services over a decade ago.
“These are regulated assets, you can verify a lot of these revenue streams from other places,” he said on Feb. 23. “So I think this is not Enron, or Satyam for that matter.”
