Hindenburg Claims Kotak Bank Orchestrated Offshore Fund To Short Adani Stocks
According to the report, the Kotak Group launched an offshore fund that oversaw short positions on Adani stocks in partnership with Hindenburg Partners. (Representative image)
Hindenburg Research, based in the US, disclosed receiving a 46-page show cause notice from SEBI regarding its Adani Report on June 27.
Kotak Mahindra Bank, a private sector lender and brokerage firm founded by Uday Kotak, created and managed the offshore fund structure used by the investor partner of US-based Hindenburg to short Adani stocks, said the research firm in an update on July 2.
According to a report by Moneycontrol, the US-based short seller questioned why SEBI did not mention Kotak Bank in its observations.
Also Read: Hindenburg Gets Notice From SEBI About Adani Short Bet
“While SEBI seemingly tied itself in knots to claim jurisdiction over us, its notice conspicuously failed to name the party that has an actual tie to India: Kotak Bank, one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and oversaw the offshore fund structure used by our investor partner to bet against Adani. Instead, it simply named the K-India Opportunities fund and masked the ‘Kotak’ name with the acronym ‘KMIL’,” Hindenburg said.
(KMIL is Kotak Mahindra Investments Limited)
Reportedly, Hindenburg alleged that SEBI’s omission of Kotak’s name might be intended to shield the businessman from scrutiny.
“Uday Kotak, founder of the bank, personally led SEBI’s 2017 Committee on Corporate Governance. We suspect SEBI’s lack of mention of Kotak, or any other Kotak board member may be meant to protect yet another powerful Indian businessman from the prospect of scrutiny, a role SEBI seems to embrace,” Moneycontrol quoted Hindenburg as stating.
Hindenburg Research Gets SEBI Letter
US-based Hindenburg Research stated in a blog post on July 2 that it received a show cause notice from market regulator SEBI concerning its Adani Report.
Hindenburg stated that it received the 46-page show cause notice on June 27. The blog post mentioned that the research firm was short on Adani shares “through a deal with an investor partner who was indirectly short on Adani derivatives via a non-Indian, offshore fund structure.”
The post disclosing the SEBI notice reaffirms Hindenburg’s stance that it had fully disclosed its short position on Adani shares, “allowing readers to consider potential bias, as we stood to gain from a decrease in Adani shares.”
SEBI Investigating Adani
SEBI has been investigating the Adani group for its use of tax havens and allegations of stock manipulation and the Supreme Court has given it till August 14 to complete its investigation.
In January, the top court ruled that the Adani Group would not undergo additional investigations beyond SEBI’s current scrutiny, providing relief to the conglomerate.
The verdict indicated that there was no increased regulatory risk for Adani. Additionally, the court decided against changing disclosure rules for offshore funds, despite assertions made by Hindenburg.
In January 2023, Hindenburg Research released a report alleging stock manipulation and accounting fraud by Adani group companies, just before Adani Enterprises planned a Rs 20,000 crore share sale. The conglomerate dismissed the report as malicious and unsubstantiated.
The group, which refuted the allegations, suffered a loss of as much as $150 billion in combined market value after the report but has since rebounded.
