MSCI review: 3 Adani stocks could be axed in May as sell-off continues

MSCI has said that it will postpone implementation of updates to weightings for two of Adani Group firms, Adani Total Gas and Adani Transmission, to the May benchmark review.

The reversal of the updates to Adani Total Gas and Adani Transmission in the February index review will be reflected in the MSCI Index Product files starting from 16 February, MSCI stated.

The index provider will also apply a special treatment for all Adani Group’s associated securities in the MSCI Equity Indexes starting from February.

Shares of Adani Total Gas, which have lost over 70% since a critical report by US-based short-seller Hindenburg Research late January, turned briefly positive today before slipping 1.8% lower.

Adani Transmission shares were up 1%, while other Adani group companies also traded higher.

Adani did not immediately respond to a request for comment sent outside of normal Indian business hours.

MSCI said last week it would cut the weightings of four Adani Group companies, including flagship firm Adani Enterprises, in its indexes after reassessing the number of shares that are freely traded.

The new index weightings were due to come into effect on March 1 but the proposed changes to Adani Total Gas and Adani Transmission will be delayed until May.

MSCI said “potential replicability issues” are behind the decision. Its methodology calls for indexes to be replicated “in an actual portfolio in a cost efficient matter.”

MSCI did not immediately respond to a Reuters request for comment on why the changes were reversed shortly after being announced last week.

The changes to the weightings of Adani Enterprises and ACC, a major Indian cement company the Adani Group acquired from Holcim last year, are still due to go ahead.

MSCI examined the size of companies’ free floats, having determined there was “sufficient uncertainty” surrounding some investors in Adani companies.

The MSCI decision came after Hindenburg accused the Indian conglomerate of improper use of offshore tax havens and stock manipulation. The group has denied any wrongdoing.

The Hindenburg report has plunged Adani, led by billionaire Gautam Adani, into crisis, wiping some $120 billion off the value of the group’s companies.

Adani and two of its main subsidiaries caught up in the short-selling storm in recent weeks are to hold calls with bond investors on 16 and 21 February, according to a Reuters report.

With agency inputs