Mark Mobius: Adani had 'big problems' that put me off, but India still looks appealing

Investor Mark Mobius was enactment disconnected Adani's massive planned stock sale due to the fact that of concerns astir the group's indebtedness heap and vulnerability to governmental risk, helium told CNBC Tuesday.

But helium does not judge the fraud accusations that person rocked 1 of India's biggest conglomerates volition person a knock-on effect connected the wider Indian marketplace — and successful information helium says immoderate publicity could beryllium bully for investing.

"When you're successful these immense infrastructure projects, peculiarly if it's extracurricular of India, and, you know, they've been exploring different areas of the world, you get into tons of governmental risks," Mobius told CNBC's "Capital Connection."

The Adani conglomerate spans ports, airports, mining, cement, powerfulness and more.

"The governmental hazard becomes paramount erstwhile you person a precise large indebtedness heap and you're trying to marque wealth to wage disconnected that debt, and possibly immoderate governmental lawsuit volition enactment up a wrench into the gears truthful that you're not capable to wage back. So that's 1 of the large problems that I had," Mobius said.

His firm, Mobius Capital Partners, focuses connected emerging markets and India is 1 of its apical allocations.

On Jan. 24, U.S.-based abbreviated selling steadfast Hindenburg Research published an explosive report alleging the Adani Group had engaged successful "brazen banal manipulation and accounting fraud strategy implicit the people of decades."

Companies including Adani Enterprises, Adani Transmission, Adani Green Energy, Adani Power and Adani Total Gas person plummeted successful worth since then, with the radical shedding much than $113 cardinal from its marketplace value. Adani-exposed speech traded and communal funds person been hit heavily.

That is contempt beardown denials of wrongdoing by the steadfast and its chairman, Gautam Adani, which were elaborate successful a 413-page report connected Jan. 29.

On Feb. 1, Adani called off a afloat subscribed $2.5 cardinal merchantability of Adani Enterprises shares, citing the banal terms movements.

Adani Enterprises stock terms this year.

There volition present beryllium questions for the Indian authorities and large banks that funded Adani with loans arsenic scrutiny connected the institution continues, Mobius told CNBC.

But, helium added: "There are tons of terrific companies successful India that person fantabulous firm governance, that truly behave precise good successful the market. So we person to usage the Adani arsenic benignant of somewhat of an isolated case."

On the imaginable fallout, helium said, "The Adani companies represent, what, astir 6% of the Indian index. It's big, but it's not that significant."

"You tin spot that the scale has not suffered that much."

India's Sensex and Nifty 50 indexes dropped to astir three-month lows connected the news, but person remained broadly resilient.

Analysts astatine Goldman Sachs, Nomura and HSBC have besides said they bash not judge determination volition beryllium a "broader contagion" successful Indian markets.

Nifty 50 index.

Some investors and analysts person characterized India arsenic a bright spot implicit the past twelvemonth arsenic different large economies person suffered from vigor marketplace volatility, decades-high ostentation and a crisp slowdown successful economical growth.

Mobius besides told CNBC: "The bully news, successful my view, is that it calls to attraction to the satellite that India is big. And determination are immoderate precise large companies successful India."

"So the publicity successful the planetary press, successful immoderate ways, is beneficial. It wakes up radical who person been sleeping, and not looking astatine India the mode they should, arsenic a large state and a precise fast-growing country."

Another positive, helium said, "is that the allegations volition rise questions, and there'll beryllium introspection of different companies and firm governance volition astir apt amended arsenic a result."