Adani: ‘Crisis creates opportunities’: Rajiv Jain on buying Adani stocks

NEW DELHI: Rajiv Jain, the chairman of GQG Partners, has defended his company’s recent $1.87 billion purchase of stakes in the Adani Group, despite concerns over governance standards and exposure to coal. Speaking to the Economic Times, Jain said his firm had invested in fossil fuels before and that their job was to maximise returns within the constraints set by clients.
Jain, however, clarified that GQG didn’t choose to buy stakes from the Adani family trust over others; rather, that was the promoter family’s decision. He also noted that buying from the secondary offering was more efficient for logistical reasons, such as timing. Jain emphasized the importance of speed in these types of situations, as the word would inevitably leak if the deal took too long, making the stock less attractively valued.
When asked about GQG’s investment rationale for the Adani Group, Jain noted that the firm has a $5 billion investment in various utility-type businesses globally, which tend to have a long tail and negative free cash flow if they grow since they get paid on their capex.
Jain believes that part of the issue with Adani Group is that many people don’t fully understand how the game is played on the utility side. He also noted that most Adani Group companies have a debt to Ebitda ratio of around three times, while US utilities on average have a debt to Ebitda ratio of around 6-6.5 times. Jain believes that debt in regulated utility businesses is acceptable, but it’s not suitable for cyclical businesses.
Shares of all Adani Group companies had rallied on Friday on the news of GQG’s investment, with Adani Enterprises jumping nearly 17 per cent. In past three trading sessions, the combined market valuation of the ten listed firms have jumped more than Rs 1.42 lakh crore
Jain also shared that GQG has been aggressive in a decline before, citing the 2004 elections when the Indian market declined 25%+, and the whole market was in upset. In that situation, Jain bought shares hand over fist. He also mentioned a crisis in ITC in 1996 due to a tax situation, which GQG invested in and held for almost 20-plus years.

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