Hidenburg said Kotak Bank of created and oversaw the offshore fund structure used by their investor partner to bet against Adani.
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Kotak Mahindra bank and its brokerage firm created and oversaw an offshore fund used by an unnamed investor to profit from a plunge in Adani shares that followed a damning Hindenburg report, the US short seller said on July 2, 2024. The bank was founded by billionaire banker Uday Kotak, who the report also noted had formerly held a prominent role in the Securities and Exchange Board of India (SEBI).

Hindenburg Research, which had in a January 2023 report alleged stock market manipulations and accounting fraud at the Adani group, said it has received a show cause notice from the Indian markets regulator SEBI over gains made from betting on the conglomerate’s shares.

The US short seller said it had disclosed that it had bets against the group, adding that its gains were only over ₹4 million.

Calling SEBI’s show cause notice as attempted intimidation, Hindenburg asked why the market regulator did not name Kotak.

SEBI’s 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,” Hindenburg said.

Instead the regulator simply named the K-India Opportunities fund and “masked the ‘Kotak’ name with the acronym ‘KMIL’,” it added. KMIL refers to Kotak Mahindra Investments Ltd, an asset management company.

Kotak Mahindra later responded to Hindenburg’s claims, saying the U.S. short seller has never been an investor in the K-India Opportunities Fund.

Hidenburg earned ₹4.1 million from Adani saga

The January 2023 report, that led to a rout in Adani shares that at one point saw more than ₹150 billion being wiped out from market value of the 10 listed companies, earned a gross revenue of about ₹4.1 million through gains related short positions created from “one investor relationship” and about “₹31,000 through our own short of Adani US bonds,” Hindenburg said.

It, however, did not name the investor.

SEBI did not immediately offer any comments on the Hindenburg claims while representatives for Kotak did not immediately respond to requests for comment.

“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,” Hindenburg said.

Hindenburg said it 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”. That it was short on Adani shares was fully disclosed, it said.