The fallout from the US Department of Justice bribery charges against the Adani Group and its chairman, Gautam Adani, has widened with investors yanking hundreds of millions of dollars from the Florida-based money manager GQG Partners, according to Swiss investment house UBS.
UBS calculated that investors had pulled A$600 million (US $390 million) from asset management billionaire Rajiv Jain’s GCQ Partners in the two trading days following news of the charges on November 21.
UBS estimated there had been a further large outflow of client funds totalling hundreds of millions of dollars from the boutique investment firm in the days following.
GQG Partners, which is a major backer of Adani Group companies, had invested around $10 billion in the energy-to-ports group before the US charges were laid.
The Adani Group has dismissed the Justice Department’s allegations of involvement in a $265-million bribery scheme to win Indian solar energy contracts as “baseless”, insisting it is committed to “world-class regulatory compliance.”
The latest scandal to embroil the Adanis has thrust the Indian-born Jain, known as an investment risk-taker, back into the spotlight.
GQG shares, which are listed on the Australian stock exchange, tumbled 14 per cent at the start of the trading week after UBS downgraded the stock from “buy” to “neutral” and slashed its price target for the company by 30 per cent to A$2.30.
“We see some advisers and clients pulling funds in response to serious allegations against Adani,” UBS told clients in a note. It forecast slow funds growth in the near term for GQG but added it was “largely comfortable” with GCQ’s investment exposure to the Adani Group.
Jain, an Indian-born emerging markets investor, has forged a reputation of being a stock market “contrarian” and going against the grain. The fund outflows and stock downgrade has raised big questions for the firm. But the billionaire fund manager has maintained his confidence in his gamble on the Adani Group, saying it has “the best assets available in India.”
But the scrutiny of the group has been mounting. Last week, French energy giant TotalEnergies suspended its investments in Adani Green until it knows the outcome of the US charges. Total holds a 19.8 per cent stake in Adani Green. The Kenyan government has also scrapped major contracts with the Adani Group including one to run the country’s largest airport.
Adani Green, which is the main focus of the US fraud charges, has seen its shares rally after hitting a year low of Rs 898.55 on November 26. But on Monday, the shares after surging 9 per cent in early trade erased its gains to close flat while on Tuesday they fell 1.2 per cent to finish at Rs 1,327.95.
Meanwhile, brokerage Bernstein has tagged Adani Green Energy with an 'Underperform' rating and suggested a price target of Rs 800. Adani Green hit a 2024 peak of Rs 2,069.
GQG plowed huge sums into the Adani Group companies after their shares crashed in the wake of the bombshell Hindenburg Research report on the group in early 2023. The US hedge fund report accused the group of “brazen stock manipulation and accounting fraud” – allegations that the Adani’s strongly rejected.
Jain, GCG’s founder and chief investment officer, said he made the aggressive investments in the Adani companies as a calculated bet that the shares would rally following the scandal. GCG is believed to have made billions of dollars from its investments in the Adani Group.
Gautam Adani said on the weekend that the accusations his group faces are “the price of pioneering” and that “the more bold your dreams, the more the world will scrutinise you.“
UBS estimated the client outflows from GCG on a memo from the investment manager to its clients. GQG has assets under management of $156 billion.
