There is a popular saying, Fools Rush In Where Angels Fear to Tread.
The recent block deals in Adani Group companies where a US based fund has picked up equity worth 15,000+ Crores looks like a case of Fools Rushing In or at least a conducive environment being created to assure other fools to rush in.
The block deals, done by GQG Partners, has resulted in the SB Adani Family Trust getting all the cash but it has been made to look like that the Adani Companies got the money. This fund, is a very conservative fund and has never invested in companies that have a very high price to earning ratio (P/E Ratio). But in this case, the fund seems to have made an exception.
All Adani group companies had stratospheric valuations when the Hindenburg Report hit the group in Jan 2023, just before their 20,000 Crore FPO.
And even after losing 140 Billion in valuation in the period from then to now, they still have some very fantastic valuations and P/E Ratio’s. The shares are still trading at very high price and were getting a hit on the lower circuit till this deal took place.
As this deal gives money directly to the SB Adani Family Trust, there is a possibility that the money may be used or is being used to pump up the share prices as is evident from the fact that post this deal the share prices have started to rise.
Some experts have cautioned the retail market to stay cautious of the group and have written that the GQG Block deal does not pass the smell test for being a good and clean deal.
Retail investors should worry as to why are the promoters selling their stake when the valuation is down by an average of 65% or more? They should ask, why the company did not issue fresh shares to raise money for itself rather than raise money for the promoters?
Stock markets are where the men go to play. Thus they are all adults and the risks and rewards they get is with their senses in place and open eyes. If those who play the stock market get trapped, they only have their greed and fear to blame. Tread with caution is all one can say.
