Adani shares fall as MSCI reviews ‘free float’ of group stocks; Adani Enterprises down 20%

Shares of billionaire Gautam Adani-controlled Adani group companies opened lower on Thursday, snapping two sessions gaining streak, amid a report that index provider MSCI may announce changes to the free float status of some of the group's stocks. MSCI is reviewing the free float of Adani group securities after market participants raised concerns about their eligibility for the MSCI Global Investable Market Indexes. Changes for Adani stocks associated with its MSCI Global Investable Market Indexes are slated to be announced later today.

Reacting to the news, most of Adani group stocks opened in red today, barring Adani Wilmar, with Adani Enterprises declining as much as 20% in early trade. It was followed by Adani Ports with a 9% loss, while Adani Power, Adani Transmission, and Adani Total Gas hit their respective 5% lower circuit limit.

Among others, Adani Green Energy dropped as much as 5%, Ambuja Cements shed 7.5%, and ACC dropped 4% in the first two hours of trade so far. NDTV shares also witnessed selling pressure, falling over 4%.

Bucking the trend, Adani Wilmar shares jumped 5% after the FMCG major reported a 16.5% rise in its consolidated net profit at ₹246 crore for the December quarter of 2022 (Q3FY23), as compared to ₹211 crore in the year-ago quarter. The revenue from operations rose 7% to ₹15,438.05 crore from ₹14,370.92 crore in the same quarter last year.

MSCI decided to review the free float of Gautam Adani-controlled listed securities following a report by U.S.-based Hindenburg Research, which alleged key listed Adani firms have taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. The conglomerate, however, refuted all allegations in a detailed 413-page response to Hindenburg’s report.

“Following our 27 January 2023 announcement regarding the Adani Group, MSCI has received feedback from a range of market participants concerning the eligibility and free float determination of specific securities associated with the Adani Group for the MSCI Global Investable Market Indexes (GIMI),” the index provider says on Thursday.

MSCI said that certain Adani Group investors should no longer be designated as free float. “MSCI has determined that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float pursuant to our methodology,” the index operator says, adding that this determination has triggered a free float review of the Adani Group securities.

MSCI defines the free float of security as the proportion of shares outstanding that are considered available for purchase in the public equity markets by international investors.

These changes are scheduled to be announced later today as part of MSCI’s February review. Currently, Adani Enterprises, Adani Ports, Adani Total Gas, Adani Green, Adani Transmission, Adani Power, Ambuja Cements and ACC are part of the MSCI India Index.

Meanwhile, the Adani Group plans to prepay a $500 million bridge loan due next month to ease investors’ concerns over leverage. The conglomerate had taken a loan of $4.5 billion from banks, including Barclays Plc, Standard Chartered Plc, and Deutsche Bank AG, to finance the purchase of Holcim’s cement assets – ACC and Ambuja - last year. A portion of that loan is due March 9. 

Earlier this week, promoters of Adani group companies announced to prepay $1.114 billion of loans, ahead of the maturity in September 2024, to release some pledged shares in Adani Ports & Special Economic Zone, Adani Green Energy, and Adani Transmission.