Global index provider MSCI is set to change its weightings for Adani Group stocks after reviewing how many shares can be freely traded, in a further setback for the Indian conglomerate reeling from fraud allegations.

MSCI said “certain investors” in Adani Group “should no longer be designated as free float pursuant to our methodology” after receiving feedback from “a range of market participants”.

Any cuts to the determined free float for the Adani Group’s listings would result in smaller weightings for those stocks in MSCI’s closely watched indices, triggering outflows as investors who track the benchmarks reduce their shareholdings.

MSCI defines the free float of a company’s shares as the proportion available for purchase in public markets by international investors.

Gautam Adani’s sprawling airports-to-energy empire has come under intense pressure and lost more than $100bn in market capitalisation after short seller Hindenburg Research accused his group of fraud and stock price manipulation.

The wipeout prompted a margin call from lenders, which include Barclays, Citigroup and Deutsche Bank, on a $1.1bn share-backed loan, while France’s TotalEnergies paused a planned $4bn hydrogen project with the group.

MSCI said it would implement changes to its calculation of the stocks’ free float and associated market capitalisation when it released its February index review on Thursday.

Adani Group stocks are in several of MSCI’s equity benchmarks including the India, Asia, emerging markets and all-country world stock indices.

Rival index provider FTSE Russell said last month that Adani index constituents included in its benchmarks “will continue to remain eligible in accordance with the underlying index methodologies”.

Shares in Adani Group’s listed companies sold off following the announcement, with flagship business Adani Enterprises falling as much as 15 per cent after posting gains for two straight days.

An Asia equity strategist at one Wall Street investment bank said MSCI was likely to follow the precedent set by previous reviews of different companies and cut its free float estimates by around half.

“Potentially the weight of Adani stocks in the indices will be cut in half as result, and passive investors will have to sell to reduce [the stocks’] weight accordingly in their portfolios,” the strategist said, adding that the bank estimated this would result in around $1bn to $1.5bn of outflows.

Those outflows will add to pressure on the company’s Mumbai-listed shares, which are components in MSCI’s India, Asia, emerging markets and all-country world stock benchmarks.

The Adani Group did not respond to a request for comment.

Hindenburg’s short report alleges that the Indian business empire uses funds domiciled offshore in Mauritius to conceal the true extent of the Adani family’s ownership of the group’s listed companies, as well as to skirt rules governing how much stock insiders can own.

Nathan Anderson, the founder of Hindenburg, said on Twitter following the MSCI announcement: “We view this as validation of our findings on offshore stock parking by Adani.”

The Adani Group, whose stocks including Adani Enterprises and Adani Ports account for more than 3 per cent of MSCI’s India index, has denied the claims.

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