More pain for Adani Group as MSCI announces to change free float status of Adani securities

The Adani Group has denied the allegations, saying the short-seller's narrative of stock manipulation has "no basis" and stems from an ignorance of Indian law.

Hindenburg has said it had taken short positions in Adani's U.S.-traded bonds and non-Indian traded derivatives. (Representative image from Reuters)

Morgan Stanley Capital International (MSCI) on Thursday, February 9, said that certain investors in Adani Group securities should no longer be designated as free float. The research firm said that it is reviewing this status and that the changes will be announced later in the day. The development assumes significance as it comes in the backdrop of the US-based short-seller Hindenburg Research's adverse report about Adani Group. It, however, added that the changes for Adani securities associated with MSCI Global Investable Market Indexes are part of its regular review for February.

"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," it said in a statement. It defines the free float of a security as the proportion of shares outstanding that is considered available for purchase in public equity markets by the international investors.
Adani Group did not immediately respond to a Reuters request for comment.

The group led by billionaire Gautam Adani has been engulfed in crisis since U.S. short-seller Hindenburg Research published a report on Jan. 24 accusing the conglomerate of improper use of offshore tax havens and stock manipulation. It also raised concern about high levels of debt and what it said were excessive valuations. In response to the MSCI statement, Hindenburg founder Nathan Anderson wrote on Twitter: "We view this as validation of our findings".

The Adani Group has denied the allegations, saying the short-seller's narrative of stock manipulation has "no basis" and stems from an ignorance of Indian law.
The report and its aftermath wiped out $110 billion off Adani's seven main listed stocks in slightly more than a week, and its flagship Adani Enterprises (ADEL.NS) was forced to abandon a $2.5 billion stock offering. Some of the companies' shares have since regained some ground.

Hindenburg has said it had taken short positions in Adani's U.S.-traded bonds and non-Indian traded derivatives.

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