MSCI cuts free float in Adani Transmission, Adani Total Gas; stocks sink 5%

The sharp decline in Adani Transmission and Adani Total Gas follows global index provider MSCI's decision to reduce the free float of the duo in its index review this month

Shares of Adani group companies tumbled on Monday, led by losses in Adani Transmission and Adani Total Gas, which were locked in their 5 per cent lower circuits at Rs 949.30 and Rs 872.35, respectively, on the BSE. 

The sharp decline in the two stocks came as a result of global index provider MSCI’s decision to reduce the free float of the duo in its index review this month. 

In a release on Friday, the index provider said it now sees the free float for Adani Total Gas and Adani Transmission at 14 per cent and 10 per cent, respectively, down from 25 per cent. 

As per MSCI, the free float or foreign inclusion factor (FIF) of a security is defined as the proportion of shares outstanding available for purchase in the public equity markets by international investors.

Analysts say the weightage of Adani Total Gas and Adani Transmission in the MSCI Standard indices could now be halved. This will lead to outflows from passive trackers. 
 

Besides, other group stocks including Adani Green, Adani Enterprises and Adani Power were trading 1.5-3 per cent lower at the time of writing this report. NDTV, ACC, Ambuja Cement and Adani Wilmar also held minor losses. 

The changes that have now been made in the free floats of the said Adani firms was to be initially done in February due for March following the scathing report on the group by US-based short seller Hindenburg Research. 

But in February, MSCI had postponed the lowering of the free float for four Adani group shares–Adani Enterprises, Adani Total Gas, Adani Transmission and ACC– as these were continuously hitting lower circuits, which could have led to “replicability issues”. 
 

That apart, MSCI on Friday said that for the remaining Adani securities, it will continue to apply the FIF implemented as part of the February 2023 index review. As a result, there will be no change in the FIF as part of the May index review for ACC, Ambuja Cements, Adani Enterprises, Adani Green Energy, Adani Ports and SEZ, and Adani Power. Adani Wilmar and NDTV are not part of any MSCI indices.

All applicable changes of MSCI's May 2023 index review will be made as of the close of May 31, 2023. The result of the review will be announced on May 11, 2023.