Adani Rout Deepens Amid Concern on MSCI Downgrades

Adani stocks plunged again on Thursday after index provider MSCI said it had determined some Adani securities should no longer be designated as free floating.

Shares of Adani Enterprises were down 11% in afternoon trading, while stocks of five other group entities – Ambuja Cements, Adani Power, Adani Transmission, Adani Total Gas and Adani Green were down from 5% to 9%, while Adani Ports fell close to 3%.

There were several other negative factors on Thursday:

a new report by Nikkei on the size of the group’s total debt,
an alleged raid on an Adani Wilmar unit by tax officials,
plus news that Norway’s sovereign wealth fund has sold its stakes in Adani companies.

Total debts owed by Adani Group exceed $41 billion and are “equivalent to at least 1% of the Indian economy”, an analysis by Nikkei Asia reported, which noted that “the scale of the conglomerate’s financial troubles amid accounting fraud allegations”.

“The liabilities attributed to 10 of Adani’s listed group companies add up to 3.39 trillion rupees ($41.1 billion), according to a Nikkei calculation using data from QUICK FactSet,” the report said, explaining that the companies included ACC, Ambuja Cements and New Delhi Television – three companies that Adani purchased last year.

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MSCI cites ‘sufficient uncertainty’

MSCI said its reassessment stemmed from market participants raising concern about the eligibility of the Indian conglomerate’s companies for some of its indexes.

Changes for Adani securities associated with its MSCI Global Investable Market Indexes were due to be announced later on Thursday as part of its regular review for February, it added.

“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 international investor.

Adani Group did not immediately respond to a request for comment.

World’s biggest investor dumps Adani

Meanwhile, the world’s largest stock investor – Norway’s sovereign wealth fund, said on Thursday it has sold its stakes in three Adani Group companies worth just over $200 million since the start of the year.

The $1.35 trillion fund, at the end of 2022, held stakes in Adani Total Gas, Adani Ports & SEZ and Adani Green Energy.

“Since year-end, we have further reduced in Adani companies. We have no exposure left,” Christopher Wright, the fund’s head of ESG risk monitoring, told a news conference.

“We have monitored Adani for many years (on ESG) issues, many on their handling of environmental risks,” he said.

‘Validation of our findings’

The group led by billionaire Gautam Adani has been engulfed in crisis since US short-seller Hindenburg Research published a report on January 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 was forced to abandon a $2.5-billion stock offering.

Some of the companies’ shares had regained some ground over the past two days, but that rally appeared to end on Thursday.

Hindenburg has said it had taken short positions in Adani’s US-traded bonds and non-Indian traded derivatives.