Adani-Hindenburg: Kotak Says It Never Worked With Short Seller

Kotak Group has denied any dealings with US-based short seller Hindenburg, in a statement on Tuesday. K-India Opportunities Fund and Kotak Mahindra International Ltd. said that Hindenburg has Never been a client of the firm nor has it ever been an investor in the fund.

KIOF has also said that it 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," the statement read.

In a separate statement to the exchanges, Kotak Mahindra Bank clarified that it had received a show cause notice from the regulator only on Tuesday.

"We would like to clarify that the transactions in respect of which the above allegations are being made were made by the Fund on the advice, and for the benefit, of its investor Kingdon," the bank said.

Kotak Mahindra (International) was informed by Kingdon that the transactions were made on a principal basis, it said. Kingdon never disclosed that they had any relationship with Hindenburg nor that they were acting on the basis of any price sensitive information.

"Neither the Fund nor KMIL were aware that Kingdon entities, which include a US SEC registered investment advisor, in respect of whom KYC as per law was duly performed, had any association with Hindenburg. The Fund and KMIL had no prior knowledge of the publication of the aforesaid Hindenburg report," the statement to the exchanges read.

The clarification comes after Hindenburg released a show cause notice it received from Securities and Exchanges Board of India, alleging collusion with another party to profit off of Adani Group shares. In a post on Monday Hindenburg said that SEBI had ignored the involvement of Kotak Group.

"Kotak Bank" created and oversaw the offshore fund structure used by our investor partner to bet against Adani, Hindenburg claimed in its post.

SEBI has issued a show cause notice to Hindenburg Research, and its sole beneficial owner, Nathan Anderson, along with Mark Kingdon who is the Ultimate Beneficial Owner of Mauritius-based entities, for trading violations in the scrip of Adani Enterprises, leading up to Hindenburg report and thereafter.

The regulator has alleged that Hindenburg and Anderson have violated regulations under SEBI Act, SEBI’s Prevention of Fraudulent and Unfair Trade Practices regulations, SEBI’s Code of Conduct for Research Analyst regulations. FPI Kingdon has allegedly violated SEBI Act, SEBI’s Prevention of Fraudulent and Unfair Trade Practices regulations, SEBI’s Code of Conduct for Foreign Portfolio Investors.

According to the show cause notice, a copy of which has been reviewed by NDTV Profit, SEBI has alleged that prior to report release, short selling activity was witnessed in the Futures of Adani Enterprises and after the report the share lost 59% between Jan. 24, 2023 and Feb. 22, 2023.

The SEBI investigation revealed that K-India Opportunities Fund – Class F opened a trading account and started trading in the scrip of Adani Enterprises before the release of report. The FPI then squared off the positions in February making a profit of $22.25 million or Rs 183.24 crore. This fund only traded Adani Enterprises on the National Stock Exchange.