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Highlights
- Rating Downgrade: Morgans cuts GQG Partners' rating from "add" to "hold" and lowers its target price to $2.47.
- Adani Controversy: GQG is reviewing its investments in Adani Group, with 10% of its clients’ assets tied to related issuers.
- Market Reaction: GQG shares fell nearly 20% before announcing a $100 million buyback plan.
Australian brokerage Morgans has downgraded its outlook for fund manager GQG Partners (ASX:GQG) following revelations that Adani Group, a significant investment for GQG, is embroiled in a bribery scandal. Adani Group Chair Gautam Adani was charged by U.S. prosecutors over an alleged US$250 million ($383.6 million) bribe, prompting GQG to reassess its holdings.
Downgrade and Target Price Revision
Morgans analysts have revised GQG’s rating from “add” to “hold”, slashing the 12-month price target from $3.10 to $2.47.
The brokerage noted:
“While GQG's response to the Adani scandal may mitigate some risks, over the medium- to long-term, this is likely to be seen as an investment mistake.”
In the short term, Morgans believes negative sentiment and the uncertainty surrounding potential downstream risks could weigh on GQG's stock performance.
Adani Investment and Market Fallout
GQG emerged as one of Adani Group's largest institutional investors after stock prices of Adani companies plummeted in March 2023. As of last week, approximately 10% of GQG’s clients’ assets were tied to issuers connected to Adani Group.
On Friday, the Florida-based fund manager announced plans to purchase up to $100 million of its ASX-listed securities in an attempt to stabilize its share price. This comes after its stock fell nearly 20% during Thursday’s session.
The Broader Context
The bribery allegations against Adani Group's chair have intensified scrutiny on companies with exposure to the conglomerate. GQG’s heavy investment in Adani-linked firms could tarnish its reputation and pose risks to client trust, especially if further negative developments emerge.
