How much did mutual funds invest in Adani shares?

Equity mutual funds (MFs), largely through equity arbitrage, equity savings and passive funds, had an exposure of ₹25,263 crore to Adani Group companies as of 31 December 2022, according to data sourced from RupeeVest. Equity investments in arbitrage and equity savings schemes are partially used for hedging and passive funds simply mimic stock market indices.

Adani Ports & SEZ and Adani Enterprises are part of the Nifty 50 index, while Adani Green Energy and Adani Transmission are components of the Nifty Next 50 index.

Barring Ambuja Cements, ACC and to some extent, Adani Ports and Special Economic Zones, active fund managers have by and large stayed away from Adani Group.

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Ambuja Cements, which was recently acquired by Adani Group, had the largest MF exposure at ₹7,922 crore. This was followed by Adani Ports and Special Economic Zone ( ₹7,786 crore), Adani Enterprises ( ₹4,549 core) and ACC ( ₹3,662 crore). Mutual funds don’t have much equity exposure to the other five Adani Group companies (these five companies together accounted for ₹1,300 crore of equity MF exposure).

Mutual fund exposure accounted for 8% of market cap of ACC as of 31 December 2022 and 7.6% of market cap of Ambuja Cements. It accounted for 4.4% of market cap of Adani Ports and Special Economic Zone.

Quant MF’s active bet

Very few MF schemes have made large active investments in Adani Group. Among equity schemes, Quant Large Cap had 7.96% of its scheme exposed to Adani Ports & SEZ. Quant Tax Plan had 7.7% of its scheme assets exposed to Ambuja Cements.

Taurus Large Cap, which is a small scheme with assets under management (AUM) of just ₹34 crore, had 6.1% of its scheme assets exposed to Adani Enterprises.

Of these schemes, Quant Tax Plan is the largest with an AUM of ₹6,179 crore.

Quant MF has taken large active bets on Adani Ports & SEZ. Quant Large Cap, Quant ESG Equity Fund, Quant Flexi Cap Fund, Quant Focused Fund, Quant Absolute Fund, Quant Tax Plan, Quant Large and Mid Cap Fund and Quant Multi-Asset Fund had 5-8% of their scheme AUM exposed to Adani Ports & SEZ, as of 31 December 2022.

The sharp run-up in valuations of Adani Group stocks over the years has led to most active fund managers staying away from the group, even though the group companies’ weights in indices have increased over the years as their stock prices have soared.

Before the current fall in stock prices, Adani Green Energy and Adani Total Gas traded at 12-month trailing price-to-earnings of more than 700 times. Adani Enterprises and Adani Transmission traded at price-to-earnings multiples of 400-450 times on trailing basis.

Before the correction, Adani Enterprises had delivered one-year returns of 135%, Adani Transmission 124%, Adani Total Gas 114% and Adani Green Energy 182%.