Ann: 2022 Full Year Results - Investor Presentation, page-16

The article:
GQG tips $2.8b into Adani stocks
by Benjamin Rusnak,
March 2, 2023 06:10 PM
Rajiv Jain, the founder of $130 billion ASX listed global equity fund GQG that has tipped $US1.9 billion ($2.82 billion) into four listed Adani Group companies, says the fallout from an activist short seller report has allowed him to snap up “fantastic assets” at an attractive price.Mr Jain spoke to The Australian Financial Review hours after the investment in the Adani companies was revealed and said he was confident that the investment would prove a sound trade.“The disconnect is just actually mind-boggling,” the investor said of the divergent market views of the Adani companies.GQG Partners co-founder Rajiv Jain in Fort Lauderdale. The fund invested $US1.9 billion in several Adani companies. A short seller report penned by Hindenburg alleged that Indian businessman Gautam Adani had orchestrated the “largest con in corporate history” wiping out an astounding $US144 billion of share market value from Adani operated companies.“They have their view, and we have our view, and we happen to disagree with their view, but that’s what makes a market,” he said.Mr Jain described the airport, port and energy assets owned by the Adani companies as “fantastic,” “irreplaceable” and available at a good price.“About 25 per cent of India’s air traffic passes through their airports and 25 to 40 per cent of India’s cargo volume goes through their ports,” he said.“The biggest competitors are actually the Indian government, not exactly the fastest running horse in the race.”The four investments – Adani Ports and Special Economic Zone, Adani Green Energy, Adani Transmission, and Adani Enterprises – were made by GQG via block trades following an approach by investment bank Jefferies and were acquired from the Adani family.“Adani Green Energy is by far the fastest and the largest private sector, green energy company in India. They’re rolling out almost three gigawatts annually. So, so I think some of their assets are fantastic.”“Countries like India need to make the energy transition. These companies like these would be critical part of that.”Mr Jain said GQG had been following the Adani companies closely for five years, and while they liked the assets the “valuation was in no man’s territory.”‘We kept doing more work’But when Hindenburg’s short report, published in January, smashed these stocks and derailed a capital raising, GQG began conducting its due diligence.That as motivated by the fact that GQG owned several Indian banks that disclosed small exposures to the group.“We kept doing more work. And the more we looked at it like this actually interesting on its own.”GQG is known for hiring non-traditional analysts, such as former journalists, to conduct research. His team spoke to analysts, partners and former employers and asked one of its larger bankers if they would lend more to Adani.“It was a point-blank question. [The banker] said, he would love to lend more. He was not mincing words,”Mr Jain said he had no concerns about leverage within the group, noting that nine rating agencies covered the companies. He added that at as 2.5 times EBITDA [earnings before interest tax, depreciation and amortisation], the gearing was more modest compared to the 6.5 times for the ten largest utility assets in the United States.As for corporate governance concerns about the group, he said some perspective is needed.“A lot of US tech companies are still la-la land if you look at governance practices.”“The serious governance issues are in tech, such as stock-based compensation and how they account for that”Does Mr Jain believe that emerging market companies are unfairly targeted for apparent governance failings?“That’s too convenient. All I’m saying is there is fraud in every country.”Mr Jain said Adani had created a lot of value over several decades since the flagship Adani Enterprises listed in the mid-90s.An investment has compounded at an annualised rate of more than 35 per cent since that date and at almost a 30 per cent rate over 20 years.“A lot of governments have come and gone in that period. Frauds typically don’t last 30 years – three months, three years, maybe, not 30 years.“There’s been a lot of value creation over the years or decades, actually.”Mr Jain added that Adani’s Australian mining assets were a small part of the overall group, generating just 5 per cent of revenues, and said Adani might be better off considering divestment to unlock value.