Global index provider MSCI has removed two shares of Adani Group from its Indian equity benchmark, a move analysts said could spur investor outflows of nearly $400 million and lead to a sale of shares in the sprawling Indian conglomerate. Complicated planning.
The latest setback for the industrial conglomerate owned by Indian billionaire Gautam Adani comes after months of grappling with allegations of fraud and stock manipulation by short-seller Hindenburg Research. At one point, the research wiped more than $150 billion off the market value of Adani’s listed company.
The allegations, which Adani denies, have also prompted greater scrutiny by index providers of how many companies trade freely. MSCI said in a statement on Friday that it will remove Adani Total Gas and Adani Transmission from its India domestic index at the end of the month.
The removal of the two listed companies from the MSCI index adds to the challenge for Adani Group, which has struggled to boost investor sentiment following reports from short sellers and has been forced to slow a previously skyrocketing pace of acquisitions and spending .
“The company has done little to tell a different narrative and show that things are not what Hindenburg says they are,” said independent analyst Brian Freitas. Adani did report in January A 413-page rebuttal to Hindenburg’s allegations was published later in the year.
MSCI’s blaming of the exclusions on companies failing to meet its minimum free float requirements would trigger an outflow of nearly $400 million as investors tracking the benchmark reduced their holdings, Freitas said.
MSCI removed Adani Group after it cut its index weight in February, along with several other Adani-listed companies.
Adani Total Gas and Adani Transmission together account for about 0.6% of the MSCI India Domestic Index, which tracks 115 of the country’s largest and most liquid stocks traded, with a combined market capitalization of $1.08 trillion. Six other Adani Group stocks will remain in the index, with a reduced combined weight of about 1.8 percent of the equity benchmark.
Ahead of MSCI’s announcement, three Adani companies, including Adani Transmission, told the stock exchange that they were considering selling new shares, without providing details. Their board will meet on Saturday to decide.
Last week, Adani Enterprises, which includes the group’s coal trading and airports businesses, reported that profit after tax more than doubled in the first quarter. It is one of the Adani companies considering fundraising.
“Given that Adani Transmission may also want to do a fundraising soon, it makes fundraising more difficult because people are now selling $200 million (of the stock) at the end of the month,” Freitas said.