BT EXCLUSIVE: Why Mark Mobius is not interested in Adani Group stocks

Mark Mobius, an acknowledged name in the world of investing, says he is not surprised about the battering in the Adani group of stocks ever since the report from the US short seller Hindenburg Research was made public. The veteran investor and founder of Mobius Capital Partners said the slide has been on account of the group being heavily leveraged and that the high debt is a cause for concern.

The Adani Group is a key player in the infrastructure business with a presence in areas such as ports, roads, power, airports, renewable energy and cement. The worry is around the group’s ability to raise more debt for fresh expansion to fund its mega projects. “The key for the group is to strengthen the balance sheet and probably cut down on a number of projects in order to reduce the debt.  So now is not the time to raise debt but reduce it,” Mobius told BT.

Ever since the Hindenburg report broke, there has been a view that the group might have to scale down its scale of expansion and take a fresh look at investment-guzzling projects such as renewable energy. According to Mobius, one option is to get more bank help but he quickly adds: “but that is probably not on the cards in view of the substantial amount of bank debt they already have.” He agrees that divesting equity in entities would be an option. “But the question, again, is to what degree those entities are leveraged.”

Mobius has been bullish about India for a while but the Adani Group has not caught his attention. “I was not interested in the group because of the high debt.  In view of the rising interest rate environment globally, heavily leveraged companies should be avoided.” On the specific issue of how this could make a difference to investors looking at India, he was clear in his opinion. “Given the number of other financial scandals around the world, this incident is not significant in the global environment.  However, the degree to which this particular incident has been given international press coverage may be positive in the long run since it shows that India is a significant market with major companies on par with other international firms.”

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