Hindenburg Report Impact: MSCI to Cut Weighting of 4 Adani Companies

The companies within the Adani Group witnessed a significant fall in stock prices after an announcement by the MSCI that they would be reducing the amount of freely tradable shares in their calculation and cutting the weighting of the four companies in the Group in its indexes.

MSCI or Morgan Stanley Capital International is an investment research firm that provides stock indexes, portfolio risk, and performance analytics, and governance tools to institutional investors and hedge funds.

The decision by the MSCI comes in the wake of the report by Hindenburg Research, which has accused the conglomerate of improper use of offshore tax havens and stock manipulation. The Adani Group, in a long response, had denied any wrongdoing.

However, in the aftermath of the report, close to $110 billion have been wiped off the value of the group's main seven listed firms, according to Economic Times. The crisis seems to have worsened with the MSCI announcement. The changes it has announced are expected to be put into effect by the end of this month.

According to Money Control, the MSCI announcement has led to a fall of 8% for Adani Enterprises, 6.4% for Adani Total Gas, 5% each for Adani Transmission and Adani Power, 3% for Adani Wilmar, and 3%, 2%, 2.6%, and 0.3% for Adani Green Energy, ACC, NDTV, and Ambuja Cement.

The website cited a note by Nuvama Wealth Management and said that the weighting of Adani Enterprises will decrease by 30 basis points to 0.5% in the MSCI Global Standard Index. The note also stated that the weightings of the other three stocks will also decline, which could result in “around $500 million combined outflows from these stocks”.

The report by Hindenburg Research released on January 24 had claimed that it has presented evidence after two years of investigation for the “brazen stock manipulation” and accounting fraud.

It said, “Our research involved speaking with dozens of individuals, including former senior executives of the Adani Group, reviewing thousands of documents, and conducting diligence site visits in almost half a dozen countries. […] We have identified 38 Mauritius shell entities controlled by Vinod Adani or close associates. We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands.”

The report further alleged that there were no obvious signs of operations, including no reported employees, no independent addresses or phone numbers and no meaningful online presence. “Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals,” it said.