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.┬а
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 groupтАЩs ability to raise more debt for fresh expansion to fund its mega projects. тАЬThe 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. ┬аSo now is not the time to raise debt but reduce it,тАЭ Mobius told BT. ┬а┬а
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: тАЬbut that is probably not on the cards in view of the substantial amount of bank debt they already have.тАЭ He agrees that divesting equity in entities would be an option. тАЬBut the question, again, is to what degree those entities are leveraged.тАЭ┬а
Mobius has been bullish about India for a while but the Adani Group has not caught his attention. тАЬI was not interested in the group because of the high debt. ┬аIn view of the rising interest rate environment globally, heavily leveraged companies should be avoided.тАЭ On the specific issue of how this could make a difference to investors looking at India, he was clear in his opinion. тАЬGiven the number of other financial scandals around the world, this incident is not significant in the global environment. ┬аHowever, 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.тАЭ ┬а
