On January 24, 2023, Hindenburg Research, famous for activist short-selling, published a report with the headline, “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History.” This impacted all the stocks of the Adani conglomerate and within a matter of days, brought down his wealth by more than 50%. In response to this, Gautam Adani said that all allegations are baseless. The Supreme Court of India and SEBI gave him a clean chit after an investigation.

Almost two years later, Adani stocks were still recovering from the Hindenburg shock, and Gautam Adani was busy raising fresh funds, and set to launch $600 million of dollar-denominated bonds. 

But around 3 am, early Thursday morning in India, US prosecutors published the allegations that he, along with others, had promised to pay more than $250 million in bribes to Indian government officials to win solar energy contracts. The crux of their case was that he concealed these efforts while he sought to raise money from US investors.

Adani Group’s stocks and bonds plunged, wiping off around Rs 2,50,000 crore of the conglomerate’s total market value. Here at Trendlyne, we follow these market movements closely, and in this article, we will explore the impact of this on retail as well as institutional players who hold Adani stocks in their portfolios.

Domestic and foreign investors hold substantial Adani Group shares

Domestic investors held 17% of Adani stocks, while foreign investors owned 13%

Of the total investments worth over Rs 2 lakh crore by the foreign institutional investors (FIIs) as of October end, around 40% was from GQG Partners. GQG, an investment management firm, saw its shares listed on the Australian Securities Exchange fall by around 20% on Thursday.

Meanwhile, retail investors and mutual funds combined also had investments worth around Rs 2 lakh crore at the end of October.

By design, every passive fund and ETF was exposed to a few Adani Group stocks. However, even the actively managed mutual funds from Quant, ICICI Prudential, HDFC, SBI, and Mirae Asset among others had significant exposure to Adani stocks as of October 31.

Actively managed Quant mutual funds have exposure of ~Rs 5,000 crore to Adani stocks

While FIIs were continuously pressing ‘SELL’ on Adani, DIIs were pressing ‘BUY’

FIIs were right yet again in reducing their exposure to Adani-verse

Except for GQG Partners, most FIIs were quietly cutting their exposure to the Adani group stocks, while active mutual funds and retail investors were mostly sitting on the other end of the trade buying those stocks.

Quant mutual funds find themselves wrong-footed on Adani again

Quant MFs again took a chance with Adani stocks, and got burnt again

You must be wondering who were the ones among the DIIs pressing the ‘BUY’ button. I found the answer exactly where I thought I would — the monthly change page of mutual funds’ holdings on Adani Enterprises’ shareholding page, and I was struck by one name in particular — ‘Quant Mutual Fund’. If you look at the screenshot above, many funds managed by the Quant fund house took fresh positions in Adani Enterprises just last month in October. According to the data from Trendlyne, they invested over Rs 1,963 crore in this single stock and again got their hands burnt along with many investors who trusted them with their savings.

This is the second time Quant has got its fingers burnt. Quant mutual funds were among the biggest holders of Adani stocks during the Hindenburg Saga.

Adani follows the SOP

An Adani Group media release that came around 2 pm on Thursday issued denials regarding the case, “The allegations made by the US Department of Justice and the US Securities and Exchange Commission against directors of Adani Green are baseless and denied.”

The media release also cited the US Department of Justice, which said, “The charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty.”

In an interview with Forbes over a decade ago, Gautam Adani said, “Being an entrepreneur is my dream job as it tests one's tenacity. I could never take orders from anyone.” But shareholders, regulators and investors will now play significant roles in deciding what lies ahead for his conglomerate.