MSCI postpones earlier changes in Feb index rebalance for 2 Adani Group firms
2 min read 16 Feb 2023, 04:37 AM ISTAdani-Hindenburg row: MSCI will also apply a special treatment for all Adani Group's associated securities in the MSCI Equity Indexes starting from February 2023
PremiumIndex provider MSCI said it will postpone implementation of updates to the Foreign Inclusion Factors for two of Adani Group companies--Adani Total Gas and Adani Transmission, to the May index review.
It said that 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 today (16 Feb).
MSCI will also apply a special treatment for all Adani Group's associated securities in the MSCI Equity Indexes starting from February 2023.
MSCI reassessed the size of companies' free floats, having determined there was "sufficient uncertainty" surrounding some investors in Adani companies. The Index provider embarked on the review after feedback from market participants.
Recently, Morgan Stanley Capital International (MSCI) announced that it will reduce the free float designations for four Adani Group companies in multiple indices.
On 12 February, MSCI said that it will cut the free floats assigned to Adani Enterprises, Adani Total Gas, Adani Transmission, and ACC. The changes will come into effect on 1 March.
The decision to reduce the free float comes in the wake of a Hindenburg Research report, wherein the US-based short-seller had alleged that more than 75% of the outstanding shares of various companies of the Adani Group were owned by their promoters. Hindenburg alleged that the Adani Group used offshore shell entities to hide holdings by members of Chairman Gautam Adani’s family.
Meanwhile, MSCI inc will release the results of a quarterly review for Adani Group companies' ESG and climate indexes this week, the first since US-based short seller Hindenburg's allegation.
If it reflects a significant downgrade in the ESG ratings of any of the Adani companies, they could be removed from ESG indexes and trigger a fresh round of selling.
As of now, MSCI gives Adani Green Energy Ltd. a rating of A, its third-highest, and the entity is included in several of its ESG and Climate indexes. So is Adani Total Gas Ltd., also rated A. Those ratings haven’t changed since Hindenburg Research published its report on the Indian conglomerate on 24 January, MSCI.
So far, only a handful of passive ESG funds have sold shares of Adani Green or Adani Total Gas since Hindenburg Research published its report, and the sales represented a small portion of the total positions.
S&P Global Inc. said this month it was removing Adani Enterprises from its Dow Jones Sustainability Indexes. Sustainalytics last week downgraded the ESG scores of several Adani companies.
