Gautam Adani faces another setback as key index explores free float

India’s Adani Group faced fresh concerns on Thursday after financial index provider MSCI said it was reviewing the free float status of some of the group’s companies.

Billionaire Gautam Adani lost about $110 billion of the value of seven firms in the group he founded after U.S. short seller Hindenburg Research accused the group of misusing offshore tax havens and manipulating shares.

Adani Group denies any wrongdoing.

Analysts say a change in the free float status could affect the weight of the MSCI index components, which could lead to a shift in the positions of funds, since many investments around the world are linked to such indexes.

“Some investors are targeting the MSCI index,” said Neeraj Dewan, director of Quantum Securities. “Depending on the outcome of the MSCI review, we may see more pressure on some Adani group stocks.”

The world’s biggest stock investor, Norway’s sovereign wealth fund, said on Thursday it had sold shares in the Adani Group since the start of the year, selling stakes in three firms worth just over $200 million.

India’s opposition parties on Thursday criticized Prime Minister Narendra Modi as he spoke in the upper house of parliament and demanded an investigation into the allegations against the Adani Group.

Modi, pointing to opposition leaders, said, “No matter how much dirt you water, the lotus will continue to bloom,” referring to his party’s voting symbol, the lotus flower.

Free float uncertainty

“MSCI has determined that the characteristics of certain investors are subject to sufficient uncertainty that they can no longer be defined as publicly traded shares,” US-based MSCI said in a statement.

“This decision prompted an audit of the Adani Group’s free float.”

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

Changes to Adani’s securities linked to its MSCI Global Investable Market Indices are due to be announced later Thursday as part of MSCI’s February regular review.

Free float is defined as the proportion of outstanding shares that are considered available for purchase on public stock markets by international investors.

In response to MSCI’s statement, Nathan Anderson, founder of Hindenburg Research, tweeted, “We view this as confirmation of our findings.”

Shares in some Adani companies recovered this week, but fell again on Thursday following MSCI’s announcement. Shares of Adani Enterprises fell 11% after losing as much as 20% in morning trading.

Adani Transmission, Adani Total Gas and Adani Power were down 5% each, while Adani Ports and Special Economic Zone were down almost 3%.

“Mood was affected by the MSCI announcement. This will lead to an outflow if MSCI removes certain stocks,” said Ambaresh Baliga, an independent market analyst based in Mumbai.

The MSCI announcement marks the latest setback for Adani. His flagship company, Adani Enterprises, was forced to back out of a $2.5 billion share offering due to the market crash.

Indian opposition parties see the case as an opportunity to corner Prime Minister Modi, who is set to run for a third term in next year’s elections. They accuse his government of providing improper services to the Adani Group, which is denied by the government and the company.

Sporadic protests have taken place in parts of the country as opposition parties demand investigations.

Meanwhile, tax authorities in the northern state of Himachal Pradesh have inspected the facilities of Adani Wilmar, a division of the consumer goods conglomerate, for possible tax evasion, government official GD Thakur told Reuters on Thursday.

“The tax authorities will look into the company’s claims and check for tax evasion,” Thakur said.

Adani Wilmar did not immediately respond to a Reuters request for comment.

India’s market regulator, the Securities and Exchange Board of India, is investigating the market crash in Adani Group shares, a person with direct knowledge of the matter told Reuters this week.

Ratings agency Moody’s warned that the decline in share prices could affect the group’s ability to raise capital as India’s central bank reviews creditors’ risks.