Top 5 Mutual Funds with High Exposure to Adani Stocks

August 24, 2023 Mutual Fund

The NIFTY 50 and the S&P BSE Sensex reached record highs in 2023 thanks to foreign institutional investors’ appeal to the Indian stock market. Indian stocks made it through a volatile trading session without losing much ground, finishing about flat.

As on August 22, 2023, the S&P BSE Sensex concluded with a drop, settling at 65,220.03, while the Nifty also experienced a decline, ending at 19396.45.

On the back of robust corporate earnings, recovery in sectors like financials, auto, fast-moving consumer goods, and domestic growth, the remarkable rally in the Indian stock market continued in July & August until now. However, the tides could turn further if inflation continues to dampen the market’s sentiment.

Amongst the various company stocks making headlines in the market news, Adani Group is one. Recently, the combined market capitalisation of all Adani Group stocks surpassed Rs 11 lakh crore at Rs 11.29 lakh crore, reaching a six-month high on August 21, 2023.

About Adani Group Companies

The Adani Group is known as the ports-to-power conglomerate, the organisation is headquartered in Ahmedabad, state of Gujarat in India. Mr Gautam Adani (founder and chairman) established the Adani Group in 1988 and has since grown to become one of the largest multinationals in India.

The Adani Group started as a commodity trading company, specialising in textiles and agricultural items. The business expanded into importing and exporting completed items and raw materials towards the beginning of the 1990s.

The Adani Group started branching out into new markets in the late 1990s, including infrastructure, logistics, and energy. In 1998, the business constructed Mundra Port, India’s first private port, and went on to create power plants, airports, and highways.

In the early 2000s, the Adani Group became a leading player in India’s renewable energy sector, focusing on solar and wind power projects. This includes the Mundra Port, the largest private port in India, and the Adani Power Ltd, the largest private thermal power producer in India.

The company also expanded its operations globally, investing in ports, mines, and power plants in countries such as Indonesia and Africa. The group also has a significant presence in Australia, where it operates the Carmichael coal mine and rail project in Queensland.

The business is widespread and operates in various industries such as energy, agribusiness, resources, logistics, and real estate.

Adani Group is a diversified organisation in India comprising 7 publicly traded companies

List of Adani Group subsidiaries:

Data as on Aug 22, 2023
(Source: ACE MF) 

The Adani Group has, however, in recent years run into controversy and criticism over its planned Carmichael coal mine in Australia. Environmental organisations and local communities have voiced strong resistance to it. Despite this, the corporation keeps growing its activities and investments across India and the rest of the world.

Which Mutual Funds Hold Higher Allocation to Adani Stocks?

This article elucidates the top mutual funds with high allocation to ‘Adani stocks’ or stocks of Adani Group Companies:

#1 – UTI Transportation & Logistics Fund (Sectoral Fund)

UTI Transportation & Logistics Fund invests in equity and equity-related securities of companies engaged in the transportation and logistics sector. The scheme invests across the market cap, and as of July 2023, it holds 70.79% allocation in large caps, 18.41% allocation in mid-caps and 6.53% in small caps.

UTI Transportation & Logistics Fund – Allocation to Adani Stocks

Data as of July 31, 2023
(Source: ACE MF) 

UTI Transportation & Logistics Fund holds maximum exposure in stocks of Adani Ports and Special Economic Zone Ltd., which is India’s largest integrated ports and logistics company with a network of 12 ports and terminals. It holds a market capitalization of Rs 1.79 trillion as of July 2023. Currently, the overall exposure to Adani stocks accounts for 5.12% of the scheme’s assets.

#2 – Tata Infrastructure Fund (Sectoral Fund)

Tata Infrastructure Fund invests predominantly in stocks of companies under the infrastructure sector. Launched in Jan 2013, it currently has an AUM of Rs 1252.07 crore and is benchmarked against NIFTY 50- TRI.

Tata Infrastructure Fund – Allocation to Adani Stocks

Data as of July 31, 2023
(Source: ACE MF) 

The scheme invests across the market cap, and as of July 2023, it holds 36.63% allocation in large caps, 40.07% allocation in mid-caps and 17.98% in small caps. Do note the scheme has a higher allocation to mid and small-cap stocks which is considered highly risky.

Tata Infrastructure Fund holds fair exposure in stocks of Adani Ports and Special Economic Zone Ltd. and ACC Ltd. (India’s foremost manufacturer of cement and ready mixed concrete with a countrywide network of factories and marketing offices). Currently, the overall exposure to Adani stocks accounts for 4.99% of the scheme’s assets.

#3 – Taurus Tax Shield Fund (ELSS)

Taurus Tax Shield Fund is an equity-oriented scheme categorised under the tax saving mutual funds (Equity-linked savings scheme). It invests in a diversified portfolio of equity and equity-related securities and offers tax benefits, with a lock-in period of 3 years. As of July 2023, the fund has 58.35% in large caps and 8.50% in mid-cap stocks and 20.82% in small-cap stocks.

Taurus Tax Shield Fund – Allocation to Adani Stocks

Data as of July 31, 2023
(Source: ACE MF) 

Taurus Tax Shield Fund has a high exposure in ACC Ltd. a pioneer in the cement sector in India, with a market cap of Rs 369.63 billion, as of July 2023. The scheme currently has an AUM of Rs 64.92 crore and the overall allocation to Adani stocks is around 4.50%.

#4 Taurus Flexi Cap Fund (Equity Scheme)

The scheme endeavours to create a substantially diversified portfolio of equity and equity-related securities across market capitalisation. The scheme endeavours to benefit from the opportunities in the equity market across sectors and currently holds an AUM of Rs 272 crore.

Taurus Flexi Cap Fund – Allocation to Adani Stocks

Data as of July 31, 2023
(Source: ACE MF) 

In terms of Adani stocks, the subsidiary of the group ACC Ltd. holds a high allocation in the scheme. Being a Flexicap Fund, the scheme invests across market segments such as – 65.75% allocation into large-cap stocks, 17.09% and 14.31% in mid and small-cap stocks respectively.

#5 Taurus Largecap Equity Fund (Equity Scheme)

Taurus Mutual Fund was among the first few private-sector Mutual Funds to be registered with SEBI. Launched in 2013, Taurus Largecap Equity Fund, also the bluechip fund offered by the fund house, invests in equity and equity-related instruments of large-cap companies.

Taurus Largecap Equity Fund – Allocation to Adani Stocks

Data as of July 31, 2023
(Source: ACE MF) 

Taurus Largecap Equity Fund holds 97.90% exposure to equities, of which 88.25% is in large caps, 4.92% is in mid-caps and 4.44% is in small caps. The overall allocation to Adani stocks is around 4.01%, and the only allocation in Adani stocks is to ACC Ltd. (considered a market leader in the cement industry).

Why there is a limited allocation to Adani stocks?

Following accusations of accounting fraud and significant stock price manipulation in a report shared by American short seller Hindenburg, which also claimed that the value of their assets had been falsely overinflated, the business conglomerate Adani Group lost about Rs 4 trillion in market value between January and June 2023.

Adani Group Companies, including Adani Enterprises Ltd, Adani Ports & SEZ Ltd, Adani Total Gas Ltd, Adani Green Energy Ltd, Adani Transmission Ltd, and Ambuja Cements, saw an offload of shares by Mutual funds in the month of initial months of 2023 as a result of this news, according to mutual funds data compiled by PRIME Database.

[Read: Do Your Mutual Funds Still Hold Adani Stocks? Read This!]

Most actively managed equity mutual funds avoided investing in Adani group stocks due to expensive valuation and high debt levels. Additionally, the news of accounting fraud and brazen stock manipulation led to a decline in investor confidence in Adani stocks. As a result, fund managers withdrew their exposure in Adani stocks from existing equity mutual fund schemes holding the same.

However, Mr Gautam Adani the Chairman of Adani Group recently, while speaking at the Annual General Meeting of the group companies denied all allegations. He said, “The Hindenburg Research report was a combination of targeted misinformation and discredited allegations, the majority of them dating from 2004 to 2015.”

“It is worth noting that even during this crisis, not only did we raise several billion from international investors, but also that no credit agency in India or abroad cut any of our ratings,” he added further in his address to shareholders during the AGM.

The Adani group’s stock prices have considerably recovered and the firm is trying to gain investors interest by pre-paying some of its loan backed by pledged shares.

Outlook of Adani Group

Adani Enterprises reported a 44% year-over-year increase in net profit for the June quarter of the fiscal year 2023-2024, which came to Rs 674 crore.

As the Ahmedabad-based ports-to-power conglomerate continues to bounce back from the effects of a damning report by US short-seller Hindenburg Research, billionaire Gautam Adani-controlled promoter group Kempas Trade and Investment Ltd has increased its stake in the group’s flagship company Adani Enterprises. The increase in ownership occurs at the same time as US-based boutique investment company GQG Partners has begun purchasing Adani group companies’ stock.

On August 22, 2023, during intraday trade on the NSE, shares of Adani Enterprises climbed by nearly 3% to Rs 2,721 after the promoters of the Adani Group boosted their ownership position in the conglomerate’s flagship firm by 2.22% through open market acquisitions.

The Adani stocks may appear to have growth potential, but given the seriousness of the allegations, it will be prudent for investors to consider investing in Adani stocks via mutual funds only after ensuring their suitability.

[Read: 5 Important Factors to Weigh Before You Invest in Mutual Funds Online]

To summarise…

The Adani Group and its subsidiaries place a high emphasis on development and making it a reliable investment choice for individual investors seeking long-term capital appreciation. By investing in Adani stocks through mutual funds, investors can gain exposure to one of India’s most integrated corporate empires, the Adani Group.

Before placing an investment, it is essential to do extensive research on the holding companies of the Adani Group and the performance of the mutual fund schemes.

This article first appeared on PersonalFN here