Hindenburg published its report on Adani group in January
Mark Mobius noted that the Adani family’s involvement and the high debt of the company was known way before Hindenburg’s report came out.
Updated Apr 14, 2023, 3:18 PM IST
Mark Mobius, seasoned investor and founder of Mobius Capital, believes that the concerns around the Indian ports-to-energy conglomerate Adani Group were overblown by Hindenburg Research, the activist short seller who released a report about the group right before Adani Enterprises FPO in late January.
In an exchange with Business Today, the fund manager said, “My feeling is that probably the whole thing about Adani was overblown by the Hindenburg Group. They have their reasons for if you’re shorting stock, you want all the bad hints to come out. But I don’t think the reports by Hindenburg were completely accurate and on target.”
Mobius noted that the Adani family’s involvement and the high debt of the company was known way before Hindenburg’s report came out.
“Everyone knew that the family was involved in the company. There’s no secret about that. And a number of other things they supposedly revealed were pretty well known by analysts. But the fact remains the debt levels were too high, this was also known,” the fund manager added.
The Hindenburg report, that came out on January 24, three days before Adani Enterprises FPO, alleged that the Adani Group had engaged in brazen stock manipulation, accounting fraud, improper use of offshore tax havens involving the promoters family. The report also flagged concerns about the group’s high debt.
Mobius mentioned that the group has “incredible assets” and also noted GQG’s Rajeev Jain’s interest in the company. GQG Partners, led by Rajjev Jain, funnelled a little over Rs 15,000 crore in the Adani group in March after the Hindenburg fiasco hit the ports to energy conglomerate.
“There’s no question that the Adani Group has some incredible assets. And if you know that some of these assets are quite irreplaceable, they’re quite valuable going forward,” he said.
He also added, “Some investors, particularly Rajiv Jain in the US has put quite a lot of money in Adani because he felt that they have incredible assets and in the long run, this will go well.”
Mobius also stressed that since Indian banks have a lot of exposure to the conglomerate and hence are likely to help the group out.
The Adani Group owes money to the State Bank of India, Bank of Baroda, Punjab National Bank, IndusInd Bank and others.
“The banks are in trouble. So the banks are going to have to support Adanis in order to ensure that their assets come back,” he explained.
Despite his belief that the issue was overblown by activist short sellers, Mobius noted that he stayed away from the company because of its high debt.
“The problem with Adani, of course, was the debt. The debt levels were too high. That is one of the reasons why we stayed away from Adani,” he said. He further explained, “Also, they’re a little bit too big for us. We tend to focus on smaller companies, medium sized companies, and we have a pretty strict rule we don’t want companies with high debt. If the debt equity is higher than 50 per cent, we don’t invest.”