On July 2, Hindenburg Research said Kotak Mahindra Bank and brokerage firms founded by Uday Kotak created and managed the offshore fund structure used by Hindenburg’s investor partner to short Adani stocks. The research firm made these allegations in an update.
Hindenburg stated, “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 further pointed out that Uday Kotak led SEBI’s 2017 committee on corporate governance, suggesting that SEBI’s omission of Kotak’s name might be intended to protect him from scrutiny. The US-based research firm revealed that it had received a show-cause notice from SEBI regarding its Adani Report. The 46-page notice was delivered on June 27.
On January 24, 2023, Hindenburg published a report accusing Adani group companies of stock manipulation and accounting fraud ahead of a proposed Rs 20,000 crore share sale by Adani Enterprises. The Adani conglomerate called the report malicious and baseless.
Meanwhile, India’s Supreme Court ruled in January that the Adani Group would not face any further investigations beyond SEBI’s current scrutiny, offering relief to the conglomerate. SEBI has been investigating the Adani group for tax haven use and stock manipulation. The verdict suggested no heightened regulatory risk for Adani, and the court decided against altering disclosure rules for offshore funds despite Hindenburg’s claims.
According to Hindenburg, the research firm was short on Adani shares “through a deal with an investor partner who was indirectly short Adani derivatives through a non-Indian, offshore fund structure.” Hindenburg reiterated that it had adequately disclosed its short position on Adani shares, allowing readers to consider potential bias due to its financial interest in a decline in Adani shares.