By Scott Murdoch, Nandan Mandayam and Yousef Saba
SYDNEY/BENGALURU (Reuters) -Adani shares surged on Friday after a $1.87 billion investment in the group by GQG Partners Inc eased concerns about the group's ability to attract funding, while the conglomerate lined up more road shows to shore up investor confidence.
The stake purchase by the boutique investment firm marked the first major investment in billionaire Gautam Adani's conglomerate since a short-seller's critical report resulted in seven of the Indian group's listed firms losing about $130 billion in market value.
In the Jan. 24 report, U.S.-based Hindenburg Research noted high debt and alleged improper use of offshore tax havens and stock manipulation, which Adani denied. A dive in Adani stocks then prompted the group to shelve a $2.5-billion share sale.
GQG's deal "may assuage concerns about the group's ability to raise funding for the repayment of loans against its listed company shares," analysts at Kotak Institutional Equities said.
Adani Group will hold road shows this month in London, Dubai and several cities in the United States, according to a document seen by Reuters.
The meetings are scheduled for Dubai on March 7, London on March 8 and several U.S. locations between March 9-15, the document showed.
Adani did not immediately respond to a Reuters' request for comment.
Earlier this week, two sources with knowledge of the matter said Adani has told creditors it has secured a $3 billion loan from a sovereign wealth fund.
India's top court on Thursday asked market regulator SEBI to investigate the group for any lapses related to public shareholding norms or regulatory disclosures.
Overall, Adani group firms' net debt totalled $24.1 billion as of September 2022.
"The stake buying yesterday was a good market booster for Adani Group stocks which have seen a long spell of underperformance and widespread selling," said Avinash Gorakshakar, head of research at Profitmart Securities.
Adani firms said on Thursday that GQG bought 3.4% of Adani Enterprises Ltd for about $662 million, 4.1% of Adani Ports and Special Economic Zone Ltd for $640 million, 2.5% of Adani Transmission Ltd for $230 million and 3.5% of Adani Green Energy Ltd for $340 million.
Shares of flagship Adani Enterprises rose as much as 17.5% on Friday, while Adani Ports surged 10%. Adani Green Energy and Adani Transmission jumped 5% each.
Dollar bonds issued by Adani entities also rallied, with Adani Green Energy's 2024 bond adding 2.3 cents on the dollar to trade at 85.5 cents, while most bonds issued by Adani Ports and Special Economic Zone, Adani Transmission and Adani Electricity Mumbai rose by more than 1 cent.
GQG's Sydney-listed shares, meanwhile, ended Friday down 3%, compared with a 0.4% rise in the benchmark index.
GQG CLIENT QUERIES
GQG Chairman and Chief Investment Officer Rajiv Jain told Reuters the firm had carried out its own "deep dive" into Adani and disagreed with Hindenburg's report.
However, the stake purchase has raised queries from an Australian pension fund client of GQG, at a time when major investors, including Norway's sovereign wealth fund, were selling the stock.
Florida-based GQG manages money on behalf of at least four major Australian pension funds with a total of A$563 billion ($380.36 billion) under management.
Cbus Super, which has a A$243 million emerging markets mandate with GQG, said it was working to get a clear picture of its Adani exposure.
"Based on past comments of Rajiv Jain, he is the type of investor that goes for wherever there is unrealised value," said Morningstar analyst Shaun Ler, who covers GQG.
"He does not explicitly run an ESG fund, and importantly, his investors are well aware of that," he said, in reference to GQG buying into Adani, which has major coal assets and so would not fall under the environmental, social and governance banner.
"There will be people who avoid buying GQG due to Rajiv's decisions; there will also be those who want to invest with them given their good performance."
GQG's shares are up 3.58% so far this year, in line with the benchmark index.
Jain is founder, chairman and chief investment officer at GQG. He also serves as portfolio manager for all of its strategies, according to his profile on GQG's website.
GQG listed on Australia's stock exchange in October 2021, raising A$1.18 billion, making it Australia's largest listing for the year. Jain retains a 68.8% stake.
($1 = 1.4802 Australian dollars)