Retail rushed to buy Adani stocks as funds sold

The surge in interest saw as many as 2.25 million public shareholders buying shares of Adani group companies, despite a collapse in share prices, suggesting they were hoping to make a quick buck on a potential rebound as mutual funds and other institutions dumped the shares. Regardless, Adani stocks did recover some of their lost value towards the end of the quarter.

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Data from exchanges showed that new retail investors, totalling at least 1.1 million, invested in shares worth at least $1.8 billion across the Adani group’s nine core companies in the March quarter. The remaining 1 million shareholders were public non-retail investors, including so-called high net worth individuals who purchased shares worth more than ₹2 lakh each.

As a result of the Hindenburg report, the Adani group’s market value plunged by $145 billion, pulling founder Gautam Adani from the third to 21st place on Forbes’ global rich list.

Despite Adani group stocks plummeting, some public shareholders, including the government-run Life Insurance Corp. of India, added shares in the group’s nine listed firms. As a result, the public shareholder base grew by 47% during the March quarter, reaching approximately 7.1 million.Insurance giant LIC also made several opportunistic purchases in Adani Group firms during this March quarter. In the March quarter, LIC increased its stake in Adani Green from 1.28% to 1.36%. Since September 2022, LIC has raised its stake in the company from 1.15% to 1.45%. In Adani Transmission, too, LIC raised its holding to 3.68% in the March quarter from 3.65% in the December quarter and 3.46% in the September quarter. Similarly, in Adani Total Gas, LIC boosted its stake to 6.02% during the March quarter from 5.96% in December and 5.77% in September.

In the March quarter, the group’s flagship Adani Enterprises Ltd, Adani Total Gas, and Adani Transmission saw significant growth in their public shareholding base, with increases of 195% (750,000), 122% (300,000), and 115% (330,000), respectively, primarily driven by retail purchases.

Retail shareholding in Adani Enterprises rose from 6.53% to 7.9%, in Adani Ports from 6.33% to 7.8%, in Adani Green from 23% to 24.2%, and in Adani Power from 12.1% to 13.3% in the March quarter. Similarly, in Adani Transmission, retail holding grew from 2.7% to 3.9%, in Adani Wilmar from 10.4% to 10.7%, in Ambuja Cements from 9% to 11.8%, in Adani Total Gas from 1.8% to 2.7%, and in ACC from 12.7% to 13.7%.However, mutual funds sold 71 million shares in nine Adani group firms during the March quarter, while retail and other public investors picked up the same number of shares.

Promoter holdings fell in Adani Enterprises, Adani Ports, Adani Green and Adani Transmission in the March quarter, as US-based GQG Partners bought a stake in these companies from the promoters.

The SB Adani Family Trust sold 211.3 million shares for ₹. 15,446 crore to GQG Partners, using part of the proceeds to prepay the group’s debts.

The Adani group used the proceeds to prepay several loans against shares and got a bulk of the promoter group share pledges released to calm investors’ nerves and cut the group’s leverage levels.

For instance, in March, the promoters fully repaid $2.15 billion margin-linked, share-backed funding before its 31 March deadline. Additionally, Adani also prepaid a $500 million loan facility for acquiring Ambuja Cements, taking the total prepayment by the Adani family to $2.65 billion.

The latest data reveals that Elara India Opportunities Fund Ltd (an FII), during the March quarter, lowered its holding to 3.62% in Adani Transmission from 3.88% in September 2022. While most of the asset managers have monetized their stakes, a few mutual funds are still betting big on Adani group firms. During the March quarter, Tata Mutual Fund raised its stake in ACC to 1.56% from 1.33% in December. SBI Mutual Fund too increased its stake in Adani’s newly acquired cement firm to 1.8% during the March quarter from 1.32% at the end of December.

On the other hand, while foreign investors have mostly increased their stake in Adani Transmission during the March quarter, Elara India Opportunities Fund Ltd has lowered its holding to 3.62% during the latest quarter from 3.88% in the September quarter. In Adani Total Gas, the fund has reduced its stake to 1.53% during the March quarter from 1.62% in December end.