MSCI slashes free float for 2 Adani firms, here's how it can affect stocks

After battling the stock market rout triggered by the Hindenburg report for months, the Adani Group is eyeing a recovery with share sales and prepayment of loans to regain investor confidence. But news about firms linked to Vinod Adani, a shady audit firm and others named in the Hindenburg Research report, keeps haunting the conglomerate.

Months after announcing changes to the free-float status of Adani stocks in the market, Morgan Stanley Capital International has reduced the free float for Adani Total Gas and Adani Transmission.

Where does this leave Adani?

• From 25 per cent previously, the free float for Adani Total Gas is now 14 per cent, while the same has been cut down to 10 per cent for Adani Transmission.

• This could have a significant impact on Adani's recovery, as a recent MSCI decision to lower the weightage of HDFC's upcoming merged entity, triggered a 6 per cent dip for the stocks of the twins.

• Free float indicates the number of outstanding shares available for sale on the stock market, and a lower free float means less units can be purchased.

• This can also bring down the liquidity of a stock, and may indicate higher volatility, which can scare investors away.

Delayed blow?

• MSCI had postponed the implementation of the changes in weightage back in February, over replicability issues.

• Adani Total Gas had recently posted a profit surge triggered by price hikes in the January to March quater of FY23.

• Its auditor Shah Dhandharia & Co, named in the Hindenburg report, had quit shortly after that.