MSCI To Review Free Float Status of Adani Group Scrips; FT Says Adani Faced Margin Call on US$1.1bn Loan
Moneylife Digital Team 09 February 2023
Index-provider MSCI (Morgan Stanley Capital International) has decided to review the free float status of Adani group scrips after market participants raised concerns about the eligibility of companies in the Indian conglomerate for some of its indexes. Separately, a report from Financial Times says, Gautam Adani, whose Indian business empire is under pressure over fraud allegations, repaid a US$1.1bn (billion) share-backed loan last week after facing a margin call of more than US$500mn (million).
In a statement, the index-provider says, "MSCI has determined that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float pursuant to our methodology. This determination has triggered a free float review of the Adani group securities."
MSCI says it has received feedback from a range of market participants concerning the eligibility and free float determination of specific securities associated with the Adani group for the MSCI Global Investable Market Indexes (GIMI).
MSCI defines the free float of a security as the proportion of shares outstanding that is considered available for purchase in the public equity markets by international investors.
The index-provider says, it will implement the resultant free float changes and associated market-capitalisation determinations in connection with the February 2023 index review using data as of cut-off dates as described in Section 3.1.9 of the GIMI methodology. The pro-forma results of the February index review, including these changes, would be announced later today.
In addition, as part of the February index review, MSCI says it will suspend any potential changes to the number of shares (NOS) for the affected securities. Further, until otherwise announced, MSCI will review the treatment of non-neutral corporate events for the affected securities on a case-by-case basis and potentially defer their implementation. The treatment of any such non-neutral corporate event would be announced to all clients with advance notice through regular Index announcements. For the avoidance of doubt, MSCI will continue implementing any neutral corporate events, including ones requiring the application of a price adjustment factor (PAF), it added.
US-based MSCI is a provider of equity, fixed-income, real estate indexes, multi-asset portfolio analysis tools, ESG (environmental, social and governance) and climate products. It operates the MSCI world, MSCI all-country world index (ACWI), and MSCI emerging markets indexes.
Meanwhile, the Financial Times (FT) report says the lenders of the US$1.1bn loan, which included Barclays, Citigroup and Deutsche Bank, requested last week that the billionaire top up the amount of stock pledged against the loan after a sharp fall in the shares of the listed Adani companies, according to the people with knowledge of the matter.
"Since the allegations were published on 24 January 2023, the sell-off in the listed businesses had at one point knocked Rs9.4tn (trillion) or about US$114bn, or about 50%, off their value. As the shares continued to slide, Barclays informed Adani of a margin call equivalent to 50% of the loan in cash, said the people, who spoke on condition of anonymity."
"Rather than post cash against the loan, which did not mature until September 2024, the Adani group's founder and his family opted to repay it completely. Adani has not disclosed the source of the funds used to repay the loan. Adani group said it did not receive a formal request for a margin call. The full loan was repaid early "per our prepayment planning", the report says.
Meanwhile, another report from FT says French oil and gas group TotalEnergies has not yet signed a contract announced last year to extend its partnership with the Adani group for the production of green hydrogen.

TotalEnergies says it would not immediately proceed with its latest venture, which involved taking a 25% stake in Adani New Industries Ltd as part of an ambitious hydrogen co-development with Adani Enterprises Ltd, the report says.

"This project was announced, but nothing has been signed... and for now, it won't be signed," chief executive Patrick Pouyanné told reporters on Wednesday. "It makes no sense to add more (projects) until there is clarity."
Except Adani Wilmar Ltd, all Adani group companies ended Thursday in the red. Adani Wilmar closed 5% up at Rs440.30.

Adani Enterprises Ltd ended Thursday 10.72% down at Rs1,927.30 on the BSE, while the 30-share Sensex closed marginally up at 60,806.22 points. Shares of three group companies hit their lower circuit of 5% today. It includes: Adani Power Ltd which ended at Rs172.90, Adani Transmission Ltd at Rs1,248.55 and Adani Total Gas Ltd at Rs1,324.45.

Adani Green Energy Ltd ended Thursday 4.96% down at Rs761.95 after hitting a lower circuit at Rs761.70 in morning trade. Adani Ports And Special Economic Zone closed the day 2.90% down at Rs582.05.

Shares of Ambuja Cement Ltd fell 6.86% to end the day at Rs358, while ACC Ltd closed 2.91% down at Rs1,915.95. New Delhi Television Ltd (NDTV) closed 4.92% down at Rs216.55 on BSE.
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