Hindenburg Research Hits Out At SEBI For Leaving Kotak Mahindra Bank In Its Investigation

US based short seller Hindenburg Research says the market regulator Securities and Exchange Board of India left out on purpose one of the largest domestic bank which structured the vehicle for trading in the Indian derivative markets.

“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."

The US based short seller added that 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 (Kingdon Capital) to bet against Adani.

Hindenburg alleged that the regulator simply named the ‘K-India Opportunities fund and masked the “Kotak” name with the acronym “KMIL”.

Hindenburg claimed that SEBI is trying to protect the name of ‘yet another businessman (Uday Kotak)  from the prospect of scrutiny’, a role SEBI seems to embrace, it added.

Uday Kotak is the founder of the bank, and was the chair of regular’s 2017 Committee on Corporate Governance and lack of mention or show cause against Kota is an attempt to protect him.

To be clear the SEBI show cause notice mentions the role of KMIL and names the entity as Kotak Mahindra (International) Ltd. It also details the chat communication between the management of the KMIL and Kingdon group as part of the show cause notice.

SEBI has alleged that foreign portfolio investor Kingdon Capital and its entities aided Hindenburg to indirectly participate in Adani Enterprises by collaborating to trade in Adani Enterprise Futures and shared profits.

SEBI investigation found that Hindenburg colluded with Mark Kingdon and his entities in a scheme devised to use advance knowledge of non-public information to build short positions. The scheme involved sharing of draft report, waiting for Kingdon to set up trading account, agreeing to reduced profit sharing and publishing report in a pre-planned manner at the time of FPO, claiming non-association with the Indian securities market, squaring off for short sale profit and creating of India fund for Adani trade.