Adani Enterprises shares to be removed from Dow Jones Sustainability Indices

As allegations of fraud by the Adani group in Hindenburg report left investors stressed, Nifty50 stock Adani Enterprises has been removed from Dow Jones Sustainability Indices. Dow Jones said the changes in the indices will come into effect before the market opens on February 7.

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What is DJSI?

Launched in 1999, are a family of indices evaluating the sustainability performance of thousands of companies trading publicity, operated under a strategic partnership between S&P Dow Jones Indices and RobecoSAM (Sustainable Asset management) of the S&P Dow Jones Indices. They are the longest – running global sustainability benchmarks worldwide and have become the key reference point in Sustainability investing fir investors and companies alike. 

The Dow Jones Sustainability Indices measure the performance of companies selected with ESG (Environment, social, Governance, & Economic) criteria as identified by S&P global sustainability assessment  (CSA). It represents the top 10% of the largest 2,500 companies in the S&P global BMI based on long term ESG criteria. 

The national stock exchange  (NSE) on thursday  (February 2) placed Adani enterprises, Adani Ports and Ambuja cements under the additional surveillance mechanism (ASM) , Reuters reported. 

What is additional surveillance mechanism?

The ASM was introduced on March 26,2018 with the intention to protect investors from market volatility and unusual changes in share price. According to the National stock exchange  (NSE) website, “In continuation to various survillance measures already implemented, SEBI and exchanges , pursuant to discussion in joint survillance meetingsv, have decided that along with the aforesaid measures there shall be additional surveillance measures (ASM) on securities with surveillance concerns based on objectives parameters viz. Price / volume variation, volatility.

What happens when stock is under ASM? 

Any stock that is included on the ASM list will be subjected to more stringent rules. This means trading in their shares will require a 100% margin , which is aimed at curbing speculation and shortselling. Put simply, an ASM shortlisting signals to investors that the stocks have been unusuall activity.

SEBI has not announced any probe into the Adani shares crash so far. The reserve Bank of India (RBI) on Thursday sought details from bank about their exposure to Adani group companies amid the sustained fall in the shares of group companies and the withdrawal of the follow – on public offer of 20,000 crore. “Some blanks have indicated that their exposure to the group is well below their prescribed exposure limits.”

The foreign brokerage said bank funding to the group did not materially in the past few years. On an absolute level, it estimated that bank debt stood at Rs 70,000- 80,000 crore of the Rs 2 lakh crore debt in FY22. “The share of bank debt in overall group debt has reduced materially and we estimate that incrementally banks have only lent Rs15,000 crore, or 15 per cent, of the Rs1 lakh crore the group companies have borrowed over the past three years,” it said.

After Credit Suisse stopped accepting bond of Adani Group companies as collateral for margin loans to its private banking client, Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani group companies. “This might have prompted the regulator to step in,”said a banking source.

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