Shares of Adani Energy Solutions Ltd fell sharply by 7% in Thursday's trading session, following MSCI's decision to exclude the company from its MSCI Global Standard Index. The move came after MSCI raised concerns regarding the company's free float, a key metric used to assess the availability of shares for trading in the market.
Adani Energy Solutions' stock dropped 7.46%, reaching a low of Rs 995 on the Bombay Stock Exchange (BSE). As a result, the stock has now declined by 5.74% in 2024.
The MSCI's decision was based on publicly available disclosures, which revealed that the Securities and Exchange Board of India (SEBI) had issued a show-cause notice to Adani Energy Solutions. The notice was related to the potential wrongful categorization of shareholding by certain entities, a move that created uncertainty regarding the company's free float.
MSCI stated that due to these concerns, it would not be making any increases in the number of shares (NOS), Foreign Inclusion Factor (FIF), or Domestic Inclusion Factor (DIF) for Adani Energy Solutions as part of its November 2024 Index Review.
MSCI further emphasized that it would continue to monitor the Adani Group and its associated securities, particularly regarding issues related to the free float. The company also indicated that it would provide additional updates as necessary.
Despite this setback, Adani Energy Solutions recently reported a strong financial performance. The company saw a remarkable 172% year-on-year (YoY) growth in profit for the second quarter, driven by higher EBITDA and a Rs 314 crore deferred tax reversal (MAT entitlement from previous years).
Excluding the tax reversal, its profit after tax (PAT) came in at Rs 459 crore, up 61.6% compared to the previous year. Revenue for the quarter rose 68.9% YoY to Rs 6,360 crore, compared to Rs 3,766 crore in the same period last year.
Additionally, the company’s capital expenditure (capex) for the first half of FY25 stood at Rs 4,400 crore, a significant increase from Rs 2,622 crore in the first half of FY24. This growth in investment underscores the company's expansion strategy.
Adani Energy Solutions has also made strategic moves to expand its business. The company secured approval from the Central Electricity Regulatory Commission (CERC) to transfer the inter-state energy trading license from Adani Enterprises.
This license will allow Adani Energy Solutions to offer tailored power solutions to commercial and industrial (C&I) customers.
On the other hand, MSCI's exclusion of Adani Energy Solutions from its indices had broader implications for the Adani Group.
Nuvama Institutional Equities noted that while Adani Energy Solutions was the only stock in the group not to make the cut, MSCI had reduced the float of two other Adani Group companies.
As a result, Adani Green Energy could see outflows of around $173 million, while Adani Power might face $111 million in outflows, according to the brokerage firm.
