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In our article published on Sunday ‘What GQG does will matter more for Adani stocks than what US courts do’ we had noted why a strong statement from GQG Capital is what was required to provide some support or a floor for Adani stocks.
Now, a memo sent by GQG to its clients on November 21 has come to light. But parsing through the five-page document, one gets a feeling GQG is beginning to feel some jitters or at least its confidence may be drooping somewhat.
At the start of the year, Rajiv Jain of GQG was sitting high on around $4 billion in profits from his investments in Adani Group stocks. His talks then reflected a lot of confidence with his unconventional investments in 2023 having appeared to have paid off handsomely and that too in a very short time. As compared to the statements then, this memo stops with more sober statement – ‘our investments in Adani as of November 21 have had positive returns in aggregate for our portfolios.’ Connecting the dots in the memo, one can infer profits from investments are likely to have declined by at least $1.7-2 billion due to the recent crash. The margins of safety for GQG have reduced.
In defensive mode
Further, taking the bull by the horns (some aggressive statement of support like what LIC provided in March 2023) is what was required to counter the current mood that is largely sceptical when it comes to Adani stocks. This mood was further accentuated today when Total Energies stated that it was halting investments in Adani. Instead, the GQG memo is largely defensive attempting to give justifications on why the current issue may not have deeper implications, although it can’t be ruled out. Vague statements like ‘we feel Indian government will maintain support for Gautam Adani’, and except Adani Green, other companies do not need more capital ‘at this point’ fall short. More doubts creep in where they say ‘as of now we have not changed our view on the prospects for these investments. That may change as new information become available’
Overall a response that fails to convince. While things may change, investors banking on this as statement of support can learn from the history of another famous investor – Bill Ackman. After vouching his support for his large investments in Valeant Pharmaceuticals, that after great initial success unexpectedly turned into the red, in March 2016, he suddenly dumped his stake a year later!
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