Why is GQG Partners so fond of Adani group stocks

If you want to know how to multiply investments with focused risk taking, you probably must learn the lesson from Rajiv Jain of GQG Partners. Just to brush up, GQG is the same fund that invested in Adani group companies in early March 2023. However, the sum of $1.9 billion invested in Adani group companies in early March has grown to nearly $3.5 billion by the end of May. The Adani stock portfolio is up nearly 70% from lower levels. However, the GQG Partners group is far from done. It not only continues to remain bullish on the Adani group but has also added to its positions and enhanced its holdings. What explains this strange attraction that GQG Partners has for the Adani group stocks.

However, one cannot question the wisdom and vision of a man who had the courage to buy a stock at substantially lower levels, despite the negative publicity that the group had received. It is an opportunity most India investors just let go. It was less about returns and more about risk. It is not just that Adani group stocks rallied in the last 3 days since the favourable Supreme Court order, but the rally has been consistent since the lows of March 2023. The Supreme Court-appointed panel had stated that it was unable to find any evidence of price manipulation by the Adani group or its promoters. For GQG, it was not just the huge discount pricing, but also the story that was attractive.

As Rajiv Jain himself admitted in private conversations, “I have regarded Gautam Adani as among the best entrepreneurs of his generation”. It is no secret that the Adani group operates some of the largest and most important infrastructure assets throughout India and around the world. The investment group already had deep exposures to Adani assets to the tune of $5 billion. GQG was also of the view that traditional P/E based investing might make the group look expensive but it misses the bigger picture. Most of the traditional metrics of the stock market were not really relevant in this case. That is where Adani saw the big opportunity of investing in the Adani group companies.

The most important attribute about the Adani group, as per GQG Partners is that chunk of the assets of Adani group were regulated assets and these companies had predictable earnings streams over the next 15-20 years. Predictability of future cash flows was something most of the investors were not looking at and that is where GQG saw the big opportunity. Also, the main objections raised by the Hindenburg report pertain to huge capex and high debt. With  both issues being addressed. GQG finds the group inordinately more attractive than it was prior to the Hindenburg report being published.

GQG, according to Rajiv Jain, was willing to give credit for showing remarkable ability to execute on greenfield projects, something most others have struggled to do. One can accuse them of too much aggression, but not of lack of vision or tardy implementation. That is reason enough to invest; as GQG puts it.