India’s Adani shares fall after MSCI review of free-float status

Global stock index compiler MSCI says it is reviewing the status of equities in India’s Adani Group, ending a brief rally for the troubled conglomerate, as it fends off allegations of market manipulation.

In a statement published early on Thursday India time, the United States-based MSCI said the review was triggered by investor concerns about the “eligibility and free float determination of specific securities” associated with the Adani Group.

“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 firm added.

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“This determination has triggered a free float review of the Adani Group securities.”

MSCI – an acronym for Morgan Stanley Capital International – defines a free float as the proportion of shares that can be bought publicly in share markets by international investors.

The business empire of Indian billionaire Gautam Adani lost about $120bn in value after US short-selling investment group Hindenburg Research in a report on January 24 accused it of artificially inflating share prices.

The report and its aftermath also forced Adani Enterprises to abandon a $2.5bn stock offering.

The group clawed back some of that this week after pledging to repay $1.1bn worth of early loans in a move meant to reassure investors.

But nine of the 10 listed entities linked to the firm slipped back into the red in early Mumbai trading after the MSCI announcement, with flagship Adani Enterprises plunging 10 percent after recouping recent falls to multi-year lows.

Adani Transmission, Adani Total Gas and Adani Power were each down 5 percent, while Adani Ports and Special Economic Zone were down nearly 9 percent.

In response to the MSCI statement, Hindenburg founder Nathan Anderson wrote on Twitter: “We view this as validation of our findings.”

Hindenburg has accused Adani of artificially boosting the share prices of its units by funnelling money into the stocks through offshore tax havens.

Adani has repeatedly denied the allegations and accused the US investment firm of a “maliciously mischievous” attack.

The tycoon is known as a close associate of Indian Prime Minister Narendra Modi, who opposition legislators accuse of abetting Adani’s rapid rise that saw him until last month hold the title of Asia’s richest man.

The stock market bloodbath has since seen him drop down from third to 17th on Forbes’ real-time billionaires’ list.

Adani has defended his group’s operations, insisting last week that the “fundamentals of our company are very strong”.

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The Securities and Exchange Board of India regulator is investigating the market rout, a person with direct knowledge of the matter told Reuters news agency this week.

Moody’s ratings firm has warned the share price declines could hit the group’s ability to raise capital, while India’s central bank is checking on lenders’ exposure.

JPMorgan on Tuesday said Adani Group companies remain eligible to be included in the bank’s influential bond indexes.

On the same day, Adani companies said in filings the group was considering an independent evaluation of issues surrounding legal compliance, related party transactions and internal controls following the Hindenburg report.