US boutique investment firm GQG Partners has bought shares worth $1.87 billion in four Adani group companies, marking the first major investment in the Indian conglomerate since a short-seller's critical report sparked a stock rout.
Seven listed Adani companies have lost $135 billion in market value since January 24, when Hindenburg Research accused it of improper use of offshore tax havens and stock manipulation — allegations the billionaire Gautam Adani-led group has denied but that led it to call off a $2.5 billion share sale.
The investment comes on a day when India's top court asked market regulator Securities and Exchange Board of India to investigate the group for any lapses related to public shareholding norms or regulatory disclosures.
The group has been trying reassure investors with roadshows and calls with bond holders. According to sources, Adani has told creditors it has secured a $3 billion loan from a sovereign wealth fund.
US-based, Australia-listed GQG has, through block deals, bought shares worth 154.46 billion rupees ($1.87 billion) in four Adani group companies, including the conglomerate's flagship firm Adani Enterprises, a regulatory filing showed.
“We believe that the long-term growth prospects for these companies are substantial,” said Rajiv Jain, GQC chairman and chief investment officer.
GQG took a 3.4 per cent stake in Adani Enterprises for about $662 million, 4.1 per cent in Adani Ports for $640 million, 2.5 per cent in Adani Transmission for $230 million, and a 3.5% stake in Adani Green Energy for $340 million.
“This transaction marks the continued confidence of global investors in the governance, management practices and the growth of Adani Portfolio of companies,” said Adani Group chief financial officer Jugeshinder Singh.
In the run-up to the announcement, Adani group shares rallied, with Adani Enterprises climbing nearly 35 per cent over the last three sessions, Adani Ports 11 per cent and Adani Green Energy 16 per cent. Adani Transmission rose 10 per cent in the previous two sessions.
“For the short-term, this will definitely be a big positive for the sentiment for Adani stocks given a chunk of shares being bought by big investors,” said Avinash Gorakshakar, head of research at Profitmart Securities.
“But in the longer term market is going to look at how growth is going to come.”
Jefferies India was the sole broker for GQC's transaction.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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