Quant Mutual founder indicates reduced exposure to Adani group companies

Quant Mutual Fund founder and Chief Investment Officer Sandeep Tandon indicated in an interview with CNBC Awaaz on Friday that the company had pruned its exposure to the Adani Group amid a sell-off triggered by a critical report by US-based short seller Hindenburg Research.

The Adani group plunged into a crisis following accusations raised by the report released last week, and shares of its flagship Adani Enterprises and other group companies have crashed, forcing it to withdraw. 20,000 crore Follow-On Public Offering (FPO).

Hindenburg Research highlighted the huge debt burden and alleged overvaluation of Adani Group companies in a scathing report that accused the conglomerate of being involved in accounting fraud and "brazen stock manipulation."

In the interview, Tandon said Quant noticed India’s risk appetite was reducing by January-end with liquidity also shrinking relative to the global economy and so had rebalanced its portfolio.

“In our monthly predictive analytics note on behavior finance released by us, we have very clearly mentioned what changed in India and on what basis have we rebalanced our portfolio and if you link that to our NAV (Net Asset Value), you’ll know,” Tandon said.

Tandon also added that the fund is data-driven and not attached to any stock or sector.

“What you have to understand is that if there is any large group or index-weighted stock or if anything that is fundamentally sound like if we talk about Ambuja or its group companies, there are only two or three such companies where there are real assets or real cash flow. So similarly, we also invested just like the industry did,” he said.

“Yes, our weightage was a little more and we made good money in this group, but we participated at a very early stage when Ambuja (Cement) was not even part of the Adani group, and we bought around Rs 282. So, we have been deep in the money on this stock, and we have sold up also. And if you see our portfolio for January and December, we have also sold a comparatively big quantity,” he added.

He also mentioned that Quant had sold stock in group flagship Adani Enterprises in October 2022 itself.

“What investors need to understand is that if such an event unfolds, it is an event risk. In quantitative terms, there are two types of risks, known and unknown. Known risk indexes can be reverse-calculated and we can build our perspective, but for unknown risk which is an event-driven risk, we can’t quantify that. What is important is when event risk happens, one should have the strength to rebalance the portfolio after the event with no emotional attachment. When we saw liquidity data change, risk appetite collapsing, then we took appropriate steps. As soon as we saw risk profile change, we pruned down our exposure.”

He also said that he doesn’t see any current opportunity for re-entry into the group after such a big event. There is limited clarity in such a short period of time, he said, adding that in the midst of this event risk, Quant saw an opportunity in the banking sector, and had capitalized on it, deploying released funds there.