Global index provider MSCI has sought feedback from market participants on Adani group securities after a damaging report by US-based investment research firm Hindenburg led to a massive selloff across all the listed stocks of the conglomerate.
At present, eight Adani group stocks (barring Adani Wilmar and NDTV) are part of the MSCI Standard Index. They have a cumulative weight of 5.75 per cent. Their cumulative value is estimated at $3.5 billion as of Friday.
The development may pose another headache for Gautam Adani because observers feel that any adverse feedback may lead to a reduction in weightage or even the exclusion of some of the Adani stocks from the index. They, however, add that this will not happen immediately and any action will be taken only after getting the complete feedback. Any unfavourable decision could lead to FII outflows.
“MSCI is aware of the reports published regarding the Adani group and associated securities. MSCI is monitoring publicly available information regarding the situation and the factors that may impact the eligibility of those relevant securities for the MSCI Global Investable Market Indexes. MSCI welcomes timely feedback from market participants on these issues,’’ it said.
MSCI added that if there are any changes, all clients will know simultaneously.
Reducing weight
According to a note from Nuvama Alternative & Quantitative Research, one of the options that the index provider can take is to reduce the weight by half. It estimates that this could lead to a cumulative outflow of $1.5 billion. Nuvama added that MSCI can also delete specific stocks at “zero value’’. In March 2022 it had deleted Russian equity at “zero value” as it was not investable.
Brian Freitas, insight provider on Smartkarma, said the AEL offer is almost certain to be undersubscribed.
“We find that the real float of some Adani group stocks is much lower than the headline numbers and there could be selling if MSCI lowers the FIF (foreign inclusion factor),’’ he observed. The FIF is the number of outstanding shares of a listed firm that can be bought by overseas investors.
Nuvama said while Adani Total Gas has a weightage of 1.35 per cent in the MSCI Standard Index, the weightage of AEL is 1.30 per cent.
Sebi scrutiny
Sebi has reportedly increased the scrutiny of deals done by the Adanis over the past year, even as it is also studying the observations made by Hindenburg Research. According to a Reuters report, Sebi is conducting an investigation on the group’s foreign portfolio investors and it may look at the Hindenburg report to complement its probe in this regard.
