Adani to raise funds via stake sale; two group companies struck off MSCI Index

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The beleaguered Adani group has kicked off discussions with potential investors to raise $2-2.5 billion by selling shares of its flagship company Adani Enterprises, Adani Green Energy and Adani Transmission even as the last named and Adani Total gas has been struck off from the MSCI India index.

The Morgan Stanley Capability Index or MSCI India index measures the returns of large and midcap segments in the Indian stock markets. It is a common benchmark used to measure performance of global stock funds and inclusion in it is deemed prestigious for any stock.

This is reckoned as the first effort by the port-to-airport infrastructure player in India to raise resources since a follow on public offer to mop up $2.5 billion was aborted in early February by the promoters amid fierce controversy following a report alleging fraud by the US-based Hindenburg Group. The Economic Times has reported that the proceeds of the stake sale will part finance debt repayment and long-term capital expenditure. The total amount of money that might be raised in this route is yet to be finalised.

Investors that had taken part in the follow-on public offer in late January before it was abandoned included the HIS Group of Abu Dhabi and Jupiter Fund Management of the UK.

Meanwhile, as the group continues the fund-raising effort discussion the decision by MSCI authorities to strike off two of the group companies comes as another setback for the group that has been battling negative investor perception since the Hindenburg report exploded on the face of global investors on January 24. It accused the group of “brazen stock manipulation and accounting fraud for decades.” The MSCI decision, announced on May 11, will come into effect on May 31 at the close of trade.

The report shook the faith of investors to such an extent that the value of the group eroded to around $150 billion within weeks. Though the shares have recovered to some extent in the Indian bourses, it finds itself in a challenging situation to regain the confidence of the entire investor and regulator ecosystem.

Under orders by the Supreme Court of India, Sebi is investigating the accounting practices and other allegations of irregularity of the various companies of the Adani group.