MSCI postpones index weighting changes for two Adani Group companies

Index provider MSCI is postponing the implementation of changes to weightings for two Adani Group companies to its benchmark review scheduled in May this year, as the Indian conglomerate remains mired in a crisis following a US short-seller report that accused it of financial fraud.

“The reversal of the updates” to Adani Total Gas and Adani Transmission by MSCI, whose benchmarks are followed by investors with trillions of dollars under management, in the February index review will be “reflected in the MSCI Index Product files starting from February 16," MSCI said in a statement on Wednesday.

On February 8, MSCI announced that it will update the Foreign Inclusion Factors (FIFs) of specific securities associated with the embattled Adani Group as part of its February 2023 Index Review after reassessing the number of shares that are freely traded.

“In light of potential replicability issues due to impact from price limit mechanisms” implementation of previously announced updates will be delayed to the May 2023 index review, MSCI said.

MSCI last week said it would cut the weightings of four Adani Group companies, including the flagship Adani Enterprises, in its indexes. Changes to their weightings were due to come into effect from the beginning of March.

MSCI did not say why it has postponed the implementation of changes.

The changes to the weightings of Adani Enterprises and ACC are still due to go ahead.

MSCI has reassessed the size of some Adani companies' free floats, having determined there was "sufficient uncertainty" among some investors, it said in the February 8 statement.

The index provider will also apply a “special treatment for all Adani Group's associated securities” in the MSCI Equity Indexes starting from February, it said on Wednesday.

The move comes in light of the “ongoing uncertainty with regards to key input data for index construction” for the Adani Group's associated securities, the index provider said.

MSCI, however, will not implement any changes in non-market capitalisation weighted indexes and custom indexes for companies including ACC, Adani Enterprises, Adani Green Energy, Adani Ports, Adani Power, Adani Total Gas, Adani Transmission and Ambuja Cements, according to the statement.

MSCI’s actions follow a plunge in the market value of Adani Group companies after a January 24 report from New York short-seller Hindenburg Research, which accused companies owned by Indian billionaire Gautam Adani of brazen market manipulation and accounting fraud.

Despite Mr Adani repeatedly repudiating Hindenburg Research's allegations, a subsequent sell-off wiped more than $120 billion off the market value of his listed companies and dislodged the Indian tycoon from the world’s top 20 richest people list, according to the Bloomberg Billionaires Index.

His net worth stands at $50.4 billion as of Thursday, a sharp drop from the peak of his wealth of $150 billion in September last year, and is now ranked as the 24th richest person globally on the index.

On February 10, Moody’s Investors Service also changed its ratings outlook for four Adani Group companies to negative, from stable.

Adani Group and two of its main subsidiaries are set to hold calls with bond investors on Thursday and again on February 21, Reuters said on Thursday, citing a document.

The planned calls follow a long-awaited credit report issued by the Indian conglomerate earlier this week that said its companies faced no material refinancing risk or near-term liquidity issues.

Adani Group is also in talks with potential investors as it considers offering privately placed bonds worth a combined $1.5 billion for at least three of its group companies, Bloomberg reported.

If it moves ahead with any offering and was able to secure investors, it could be the first debt issuance for the conglomerate since the crisis began.