Six companies, including three from Adani Group, have seen a sharp increase in their public shareholding this year. This will lead to an increase in their weighting in various global indices, resulting in cumulative net buying of as much as $685 million (Rs 5,628 crore). Meanwhile, UPL and Havells India could see some selling on account of a reduction in their public float.
"We have looked at the shareholding patterns of large companies to check for changes to the free float over the past few quarters, especially where there could be passive flows to the stocks from index trackers. We have found six stocks where the free float has increased significantly over the past couple of quarters. Selling by company promoters has resulted in a higher float for Adani Enterprises, Adani Green Energy (AGEL), and Adani Ports and Special Economic Zone. Selling from the Government of India leads to an increase in the float for Coal India (CIL). Selling from Life Insurance Corporation of India could result in a higher float for Britannia Industries and PI Industries," says Brian Freitas, a New Zealand-based analyst with Periscope Analytics who has researched Adani Group.
In March, GQG Partners acquired shares worth $1.87 billion (Rs 15,446 crore) in four Adani Group companies from the promoter group. Last month, the US-based boutique investment firm picked up further stakes in AGEL and Adani Transmission (ATL).
Freitas predicts inflows of between $91.5 million and $318 million in the three Adani Group companies that form part of the Morgan Stanley Capital International (MSCI) or Financial Times Stock Exchange indices.
In May, MSCI dropped ATL and Adani Total Gas and reduced weightings for a few others after allegations made by Hindenburg Research in January led to doubts over the actual public float in these companies.
"There is a question mark over the increased float in global indices for Adani Group stocks due to the issues raised in the Hindenburg Research report around the shareholding from some Mauritius-based entities. Some of these entities have sold stock over the past few quarters and no longer appear in the shareholding pattern due to their holding dropping below 1 per cent of shares outstanding," observes Freitas.
Meanwhile, the government divested a 3 per cent stake in CIL via the offer-for-sale route to mop up over Rs 4,100 crore.
Besides global indices, companies whose public float has increased or decreased will also see their weighting change in domestic indices, such as those compiled by the National Stock Exchange and the BSE.
The impact of changes in free float will be reflected in domestic and global indices only in the months to come.
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