Index provider MSCI said on Thursday it had determined that some Adani securities should no longer be designated as free float after market participants raised concerns about the eligibility of the Indian conglomerate's companies for some of its indexes.
Changes for Adani securities associated with its MSCI Global Investable Market Indexes are due to be announced on Thursday as part of its regular review for February, it added.
"MSCI has determined that the characteristics of certain investors have sufficient uncertainty that they should no longer be designated as free float pursuant to our methodology," it said in a statement.
The group led by billionaire Gautam Adani has been engulfed in crisis since U.S. short-seller Hindenburg Research published a report on Jan. 24 accusing the conglomerate of improper use of offshore tax havens and stock manipulation. It also raised concern about high levels of debt and what it said were excessive valuations.
The Adani Group has denied the allegations, saying the short seller's narrative of stock manipulation has "no basis" and stems from an ignorance of Indian law.
MSCI defines the free float of a security as the proportion of shares outstanding that is considered available for purchase in public equity markets by international investor.
Adani Group did not immediately respond to a Reuters request for comment.
In response to the MSCI statement, Hindenburg founder Nathan Anderson wrote on Twitter: "We view this as validation of our findings."
The report and its aftermath wiped out $110 billion off Adani's seven main listed stocks in slightly more than a week, and its flagship Adani Enterprises was forced to abandon a $2.5 billion stock offering.
Some of the companies' shares had been rebounding this week but they tumbled again on Thursday after the MSCI announcement. Adani Enterprises shares sank 10% in morning trading after recouping recent falls to multi-year lows.
Adani Transmission, Adani Total Gas and Adani Power were each down 5%, while Adani Ports and Special Economic Zone were down nearly 9%.
The short-selling attack and shelving of the share sale have tarnished Adani's reputation. India's Securities and Exchange Board of India regulator is investigating the market rout, a person with direct knowledge of the matter told Reuters this week.
Moody's rating firm has warned the share price declines could hit the group's ability to raise capital, while India's central bank is checking on lenders' exposure.
JPMorgan said on Tuesday that Adani group companies remain eligible to be included in the bank's influential bond indexes.
Hindenburg has said it had taken short positions in Adani's U.S.-traded bonds and non-Indian traded derivatives.
Adani companies said in filings on Tuesday the group was considering an independent evaluation of issues surrounding legal compliance, related party transactions and internal controls following the Hindenburg report.