Jupiter Fund Management’s participation in Indian billionaire Gautam Adani’s $2.4bn share sale has put it at odds with rival UK asset managers that steered clear of the issue after a short seller raised concerns.
The London-based asset manager, which has profited from previous investments in Adani-linked businesses, was the only UK-listed fund group to back the share issue. Other UK-listed groups stayed away, citing worries about the company’s financial position and political connections, after short seller Hindenburg Research last week made allegations of stock manipulation and accounting fraud.
“We avoided [Adani Enterprises] as it seemed rather over-reliant on political connections, had an extremely complicated structure and was saddled with debt,” said Hugh Young, chair of Asia Pacific at Abrdn.
Schroders also shunned the stock, while Norway’s $1.3tn oil fund said on Tuesday that it had cut its position in Adani companies because of risks such as potential corruption and environmental damage.
Mark Mobius, a veteran emerging markets investor and founder of Mobius Capital Partners, told the Financial Times: “We have not been interested in Adani mainly because of its high debt.”
The Hindenburg report sent the share price of Adani Group tumbling, wiping off more than $50bn of the company’s value by Friday. Adani has denied the allegations.
Jupiter formed part of a core group of anchor investors that committed to buying nearly half the shares in the Indian industrial empire.
Other anchor buyers were mostly Indian companies and offshore funds. A clutch of global investment banks, including Goldman Sachs, Société Générale and BNP Paribas, bought stock on behalf of clients.
Ben Yearsley, investment director at Shore Financial Planning, said: “You would hope Jupiter has done its due diligence and decided that it is a sound business, hence investing.”
But Amin Rajan, chief executive of Create Research, a London-based consultancy, added that “until the Indian regulators give a clean bill of health, it would be unwise for asset managers to invest in the Adani Group. This affair is not going to go away anytime soon.”
Jupiter said: “We are monitoring the situation closely, and will always act in the best interests of our fund investors.”
The manager bought approximately £3.4mn of shares in Adani Enterprises — representing just 1.4 per cent of the anchor investors — through its £576mn India Fund.
One person close to the situation said Adani Enterprises was “a very small holding” in the fund, at 0.6 per cent, and noted that the stake was less than the size of the MSCI India index’s weighting of 1.14 per cent.
The Jupiter India Fund, which is managed by Avinash Vazirani and Colin Croft, both based in London, has backed Adani Enterprises and its subsidiaries previously. It had a stake in Adani Wilmar, which provides kitchen commodities including edible oil, until last year.
Vazirani is on the board of the UK India Business council, an organisation that aims to help UK businesses operate in India and vice versa.
The fund managers said in their last annual report that Adani Wilmar was “one of the top contributors” to performance following its initial public offering early last year.
The Jupiter India Fund previously invested £5mn in Adani Enterprises, but sold the position last year at a “significant profit”, according to one person close to the situation.
Until Tuesday’s share sale, the only Adani-related company in the fund was Adani Ports & Special Economic Zone. The managers bought £9.4mn of shares in the Indian port operator and said it was one of the fund’s largest purchases last year.
The Jupiter India Fund is among the top performing of the sector over the past year. It is ranked the sixth best Indian equity fund out of 49, according to data from Citywire. Over three years, it sits at 21st in the pack. The fund has returned 241 per cent since launch in early 2008, beating the MSCI India benchmark’s 178 per cent.
Its largest sector is financials, with top 10 holdings including the State Bank of India and ICICI Bank. Adani Enterprises, in contrast, has evolved over the years from a mining and coal trading company to a multinational conglomerate spanning food processing to aerospace and telecoms.
James Daley, managing director of consumer group Fairer Finance, said: “Obviously it’s not in Jupiter’s interest to invest in [any] company that is guilty of market manipulation and fraud — but these were accusations [that] the company denied, and many investors have continued to take part in the float nonetheless.”
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