
Adani group stocks Adani Transmission Ltd and Adani Total Gas Ltd took a beating in Friday's trade, as index aggregator MSCI decided to exclude the two shares from its indices citing low free-float following its changes to Foreign Inclusion Factor (FIF).
As a result of these changes, "these two securities will no longer be eligible for inclusion in the MSCI Global Investable Market Indexes (GIMI) as the companies will not meet the relevant free float-adjusted market capitalization requirements."
Consequently, MSCI said, Adani Total Gas and Adani Transmission will be deleted from the MSCI GIMI, as well as the related MSCI Factor, MSCI ESG, MSCI Thematic and MSCI Capped indices as of the close of May 31, 2023. This announcement will be effective June 1.
Shares of Adani Transmission fell 5 per cent to a 52-week low of Rs 871.15 on BSE, before recovering a bit. The stock stood at Rs 881 at 9.59 am, still down 3.84 per cent.
MSCI had on Friday said it would lower the free float percentages of the two Adani Group companies in the May index review. MSCI assesses Adani Total Gas' free float at 14 per cent, down from 25 per cent, and Adani Transmission's free float at 10 per cent, also down from 25 per cent. Shares of Adani Total Gas were locked at 5 per cent lower circuit limit of Rs 812.60.
The free float represents the proportion of outstanding shares available for purchase in public equity markets by international investors.
Nuvama had expected $122 million in outflow for Adani Transmission and $84 million in outflow in the case of Adani Total Gas.
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Based on the currently available information, Adani Total Gas and Adani Transmission are subject to 5 per cent up and down price limit.
"Subsequent to our announcement of the FIF calculation treatment of Adani Group securities for the February 2023 Index Review, MSCI received feedback from market participants on significant potential replicability issues arising from the price limit mechanism being triggered for the affected securities. If the lower price limit were reached for Adani Total Gas and/or Adani Transmission on May 31, 2023, the reduced trading liquidity and volumes would likely result in significant difficulty in implementing the announced index changes at the official index security closing prices," it said.
Therefore, pursuant to MSCI's Index Policies (June 2022), MSCI exceptionally will analyse the price evolution for these two securities after the close of May 31, 2023.
"If Adani Total Gas or Adani Transmission trade at the lower price limit for at least 5 minutes cumulatively during this day, MSCI will delete these securities at the lowest system price as of the close of May 31, 2023 (effective June 01, 2023). Otherwise, MSCI will use the official closing prices, as per the MSCI Index Calculation methodology. MSCI will make an announcement confirming the price used for deleting Adani Total Gas and Adani Transmission after the close of May 31, 2023," MSCI said.
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