Adani stock rout worsens as MSCI action raises outflow concerns estimated at $531 million

SINGAPORE – The sell-off in Adani stocks worsened on Friday as global index provider MSCI cut the amount of shares it considers freely tradable for four of the group’s companies, a move that will cause their weightings in its indexes to drop.

Flagship Adani Enterprises slumped as much as 10 per cent before paring losses as MSCI cut its determined free float for the stock. It also made changes for Adani Total Gas, Adani Transmission and cement-maker ACC.

Stocks linked to the Adani Group, however, have escaped removal from MSCI indexes as the Indian conglomerate continues to deal with the impact of a short-seller campaign that

wiped out almost half of its market value

in just over two weeks. 

Mumbai-based Nuvama Wealth Management estimated that the move would result in a combined outflow of more than US$400 million (S$531.3 million) from the stocks.

Adding to pressure on the embattled Adani Group, Norway’s US$1.4 trillion sovereign wealth fund on Thursday said it had sold its remaining stake in related companies, while shareholder Life Insurance Corporation of India said it would engage with the conglomerate’s management soon.

The actions by MSCI and Norway’s fund are souring sentiment again after Adani stocks staged a rebound earlier in the week as the group’s founders pre-paid some loans to calm investor nerves and the key ports unit pledged to improve its debt ratio.

Still, the pace of the rout sparked by United States short-seller Hindenburg Research’s damning Jan 24 report has eased this week.

In the meantime, the Supreme Court of India will hear on Friday two public interest litigation pleas related to the Hindenburg report.

“The pressure will remain on the stocks till the companies get the all-clear,” said Mr Sameer Kalra, founder of Target Investing in Mumbai. “The plea in the Supreme Court, if granted, will complicate matters.”

Six of the 10 Adani stocks were lower in the morning session in Mumbai. Adani Total Gas and Adani Transmission dropped as much as 5 per cent.

Twelve of 15 Adani dollar bonds were trading lower on Friday, according to data compiled by Bloomberg.

The weighting of Adani Enterprises was reduced by 30 basis points to 0.5 per cent in the MSCI Global Standard Index, Nuvama analyst Abhilash Pagaria said in a note.

The review has directed market attention back to a key allegation by Hindenburg – that offshore shell companies and funds tied to the Adani Group comprise many of the largest “public”, or non-insider, holders of Adani shares.

Billionaire Gautam Adani’s companies have suffered a stock meltdown that at one point erased US$117 billion in market value after Hindenburg

accused the company of accounting fraud and market manipulation,

allegations the group has furiously denied. Adani Enterprises was forced to pull out a key share sale at the 11th hour and shelve its first-ever public sale of bonds. 

The Adani Group has in recent days stepped up measures to reassure investors and banks by repaying loans and pledging to reduce debt ratios. The slump in the group’s dollar debt has attracted buyers such as Oaktree Capital Management and Davidson Kempner Capital Management. 

Shares of Adani Enterprises closed down 11.02 per cent on Thursday. BLOOMBERG, REUTERS