Are Adani's stocks a bargain or a sell-off risk?
The Adani Group faces the biggest bribery allegations in the US
Adani firms' stocks fell on Thursday, ending a two-day reprieve after global index provider MSCI said it was reviewing the eligibility of the group's shares in its global investable market indices.The MSCI said it has determined that some of Adani's securities can no longer be designated as "free float", a technical requirement. MSCI defines the "free float" requirement as the number of shares linked to the group freely available in public equity markets for global investors.
ALSO READ | After Hindenburg shock, Adani Group to curb capital spending plans: Report
Now, markets await MSCI's regular review report on Thursday on some Adani Securities' eligibility in its global indices. In response to the MSCI statement, Hindenburg founder Nathan Anderson tweeted: "we view this as validation of our findings".
The Gautam Adani-led group is caught in a crisis since US Research firm Hindenburg published a scathing report on January 24 accusing the business empire of improper use of offshore tax havens and stock manipulation. The Adani Group has denied those allegations as baseless.
But the report and its aftermath wiped out $110 billion off Adani's seven main listed stocks. The group's flagship firm, Adani Enterprises, was forced to abandon a $2.5 billion share sale offering.
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The group prepaid over $1.1 billion in loans against pledged shares to regain investor confidence and plans to prepay another $500 million. But media reports show that banks had baulked at refinancing those loans and called on the group to cover for the losses in the market value of those pledged shares.
In addition to increased scrutiny after the recent stock rout, a sustainability ratings company has downgraded three Adani firms on ethics concerns after the Hindenburg report. The rating company said, "the increasing financial and reputational risks stemming from the report by Hindenburg research, as well as previous investigations and inquiries into the company's activities, contribute to the negative outlook".
That downgrade is tied to Environmental, Social and Governance (ESG) matters, which can influence whether green fund managers buy or hold the securities.
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