Hindenburg Research has named Uday Kotak as the facilitator of the bet against Gautam Adani for its client, Kingdon Capital, on Tuesday in response to a show cause notice from the Securities and Exchange Board of India (SEBI), adding a new twist to the controversy surrounding its report on the Adani Group.
According to the US-based short seller, the private lender involved with the short-selling of Adani Group shares has not been named by the market regulator.
Hindenburg stated that the brokerage firms, founded by Uday Kotak, established and oversaw the offshore fund structure that was utilised by its investor partner to bet against Adani Group shares.
It stated that SEBI hid the ‘Kotak’ name by using the acronym ‘KMIL’ and solely referring to the K-India Opportunities fund. It said that KMIL stands for Kotak Mahindra Investment.
“While Sebi tried to claim jurisdiction over us, its notice did not name the party actually tied to India: Kotak Bank, one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and managed the offshore fund structure used by our investor partner to bet against Adani. Instead, it named the K-India Opportunities Fund and masked the ‘Kotak’ name with the acronym ‘KMIL,'” Hindenburg stated in a post.
“We suspect Sebi’s omission of Kotak or any Kotak board member may be to protect yet another powerful Indian businessman from scrutiny, a role Sebi seems to embrace,” Hindenburg added.
Hindenburg Research stated in 2023 that it has short positions in Adani Group firms using non-Indian-traded derivatives and US-traded bonds, but it did not disclose the specific derivatives and reference securities it employed or the number of its bets.
According to Hindenburg’s latest note, the bank’s founder, Uday Kotak, directly oversaw SEBI’s corporate governance committee in 2017.
The main purpose of SEBI’s notice, according to Hindenburg Research, was either to offer fresh legal grounds for asserting jurisdiction over it or to imply that its reported and legal investment stance was secret or dubious.
“Note that we are a US-based research firm with no Indian entities, employees, consultants, or operations. Some of these arguments seemed circular,” Hindenburg added.
Hindenburg stated the regulator claimed the disclaimers in its report were inaccurate because it was indirectly getting involved in the Indian securities market and, hence, was short Adani.
“This was no secret—everyone knew we were short Adani because we disclosed it prominently and repeatedly,” the research firm said.
Hindenburg Research stated that it was prepared to submit a Right to Information (RTI) request to obtain the names of SEBI employees involved in the Adani and Hindenburg cases, as well as the specifics of meetings and phone conversations between SEBI, Adani, and its representatives. Hindenburg Research expressed a need for further information about SEBI’s procedures.
Kotak’s Response
In response to the allegations, Kotak Mahindra clarified that Hindenburg Research has never been a client or investor in their fund. “Kotak Mahindra International Limited (KMIL) and KIOF unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the Fund,” said the company.
“The Fund was never aware that Hindenburg was a partner of any of its investors. KMIL has also received a confirmation and declaration from the Fund’s investor that its investments were made as a principal and not on behalf of any other person,” it added.
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