New Delhi Billionaire banker Uday Kotak founded a bank and brokerage, set up and oversaw an offshore fund used by an anonymous investor to profit from a slump in Adani shares that followed a damning Hindenburg report, the short seller said US.
Hindenburg Research, which in a January 2023 report alleged stock market manipulations and accounting fraud at the Adani group, said it received a show cause notice from Indian markets regulator Securities and Exchange Board of India (Sebi) over earnings obtained by betting on the conglomerate's shares.
The American short seller said it had revealed it had bets against the group and added that its profits alone were more than $4 million. While Kotak Mahindra Investments Ltd (KMIL), the asset management company that allegedly created the offshore fund , stated that Hindenburg was "never" its client, Sebi's show cause notice cited conversations between Kingdon Capital, a US short-seller client who was aware of the report before its publication, and hedge fund executives. Kotak.
Kingdon Capital subscribed to shares of KIOF Class F, an FPI of KMIL, Sebi said, adding that KIOF built short positions in 8.5 lakh shares in Adani Enterprises Ltd futures and squared the release of this subsequent report to make "a total profit 183.24 million rupees". (USD 22.25 million)".
"K-India Opportunities Fund Ltd (KIOF) is a Sebi registered Foreign Portfolio Investor (FPI) and is regulated by the Financial Services Commission of Mauritius," a KMIL spokesperson said. "The Fund follows due KYC procedures by "Onboard clients and all their investments are made in accordance with all applicable laws. We have cooperated with regulators in connection with our operations and continue to do so."
The spokesperson added that "Hindenburg has never been a customer" of KMIL or KIOF.
"The Fund was never aware of Hindenburg being a partner with any of its investors. KMIL also received confirmation and representation from the Fund's investor that his investments were made as a principal and not on behalf of any other person."Hindenburg qualified the notice called Sebi's program an attempt at intimidation and asked why the market regulator did not name Kotak.
Sebi's notice "clearly did not mention the name of the party that has an actual link with India: Kotak Bank, one of India's largest banks and brokerage firms founded by Uday Kotak, who created and oversaw the structure of offshore funds used by our investment partner to bet against Adani," Hindenburg said.
Instead, the regulator simply named the fund K-India Opportunities and "masked the name 'Kotak' with the acronym 'KMIL,'" he added. The January 2023 report, which caused Adani shares to drop to a At the time, it wiped out more than $150 billion from the market value of the 10 listed companies, grossing about $4.1 million from profits related to the short positions created. of “a relationship with an investor” and about “$31,000 through our own shortage of US Adani bonds,” Hindenburg said.
However, he did not name the investor.
Sebi did not immediately offer any comment on Hindenburg's claims. "Uday Kotak, founder of the bank, personally headed Sebi's Corporate Governance Committee in 2017. We suspect that Sebi's lack of mention of Kotak or any other member of Kotak's board may be aimed at protecting another powerful Indian businessman from the prospect of scrutiny, a role Sebi appears to accept," Hindenburg said.
The American short seller said he received a 46-page show cause notice from Sebi on June 27.
Hindenburg said he was short Adani shares "through an agreement with an investment partner who was indirectly short Adani derivatives through a non-Indian offshore fund structure." It was fully disclosed that he was short of Adani shares, said.
On January 24, 2023, Hindenburg published a report alleging share manipulation and accounting fraud at the Adani group, calling it "the biggest scam in corporate history", ahead of a proposed Rs 20,000 crore share sale by of Adani Enterprises, the group's flagship company. .
Adani Group repeatedly denied the Hindenburg report, calling it malicious and baseless. The conglomerate has since recovered most of the stock market losses. In January this year, the Supreme Court ruled that the Adani Group will not face further investigations beyond the current scrutiny by Sebi, which encompassed a probe into the use of havens. tax and stock manipulation.
Hindenburg called Sebi's show cause notice "nonsense" and "concocted to serve a predetermined purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by India's most powerful individuals."
"After a year and a half of investigation, Sebi did not identify any factual inaccuracies in our Adani investigation. Instead, the regulator took issue with things like our use of the word 'scandal' when describing multiple previous cases of accused Adani promoters. "of fraud by Indian regulators. and our quote from an individual who alleged that Sebi is corrupt and works 'hand in hand' with conglomerates like Adani to help it circumvent regulations," he said. The US firm said the notice The cause of the show resolves some questions: "Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No, we had an investment partner, and net of costs, we can barely get by." above the break-even point in our Adani short.
"Our work at Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of," he said.
"To this day, Adani has still not addressed the allegations in our report, instead providing a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations," he said, adding that Its January 2023 report had "provided evidence of a vast network of offshore shell entities controlled by (group chairman) Gautam Adani's brother, Vinod Adani, and close associates." In Sebi's notice, it said: "Much of the notice seemed designed to imply that our legal and disclosed investment position was secret or insidious, or to present novel legal arguments claiming jurisdiction over us. Please note that we are a US-based research firm with no Indian entities, employees, consultants or operations.”
The regulator, he said, claimed that the report's disclaimers were misleading because the company was "indirectly participating in the Indian stock market."
"This was not a mystery, virtually everyone on earth knew that we were missing Adani because we revealed it prominently and repeatedly," he said.
Hindenburg Research, which in a January 2023 report alleged stock market manipulations and accounting fraud at the Adani group, said it received a show cause notice from Indian markets regulator Securities and Exchange Board of India (Sebi) over earnings obtained by betting on the conglomerate's shares.
The American short seller said it had revealed it had bets against the group and added that its profits alone were more than $4 million. While Kotak Mahindra Investments Ltd (KMIL), the asset management company that allegedly created the offshore fund , stated that Hindenburg was "never" its client, Sebi's show cause notice cited conversations between Kingdon Capital, a US short-seller client who was aware of the report before its publication, and hedge fund executives. Kotak.
Kingdon Capital subscribed to shares of KIOF Class F, an FPI of KMIL, Sebi said, adding that KIOF built short positions in 8.5 lakh shares in Adani Enterprises Ltd futures and squared the release of this subsequent report to make "a total profit 183.24 million rupees". (USD 22.25 million)".
"K-India Opportunities Fund Ltd (KIOF) is a Sebi registered Foreign Portfolio Investor (FPI) and is regulated by the Financial Services Commission of Mauritius," a KMIL spokesperson said. "The Fund follows due KYC procedures by "Onboard clients and all their investments are made in accordance with all applicable laws. We have cooperated with regulators in connection with our operations and continue to do so."
The spokesperson added that "Hindenburg has never been a customer" of KMIL or KIOF.
"The Fund was never aware of Hindenburg being a partner with any of its investors. KMIL also received confirmation and representation from the Fund's investor that his investments were made as a principal and not on behalf of any other person."Hindenburg qualified the notice called Sebi's program an attempt at intimidation and asked why the market regulator did not name Kotak.
Sebi's notice "clearly did not mention the name of the party that has an actual link with India: Kotak Bank, one of India's largest banks and brokerage firms founded by Uday Kotak, who created and oversaw the structure of offshore funds used by our investment partner to bet against Adani," Hindenburg said.
Instead, the regulator simply named the fund K-India Opportunities and "masked the name 'Kotak' with the acronym 'KMIL,'" he added. The January 2023 report, which caused Adani shares to drop to a At the time, it wiped out more than $150 billion from the market value of the 10 listed companies, grossing about $4.1 million from profits related to the short positions created. of “a relationship with an investor” and about “$31,000 through our own shortage of US Adani bonds,” Hindenburg said.
However, he did not name the investor.
Sebi did not immediately offer any comment on Hindenburg's claims. "Uday Kotak, founder of the bank, personally headed Sebi's Corporate Governance Committee in 2017. We suspect that Sebi's lack of mention of Kotak or any other member of Kotak's board may be aimed at protecting another powerful Indian businessman from the prospect of scrutiny, a role Sebi appears to accept," Hindenburg said.
The American short seller said he received a 46-page show cause notice from Sebi on June 27.
Hindenburg said he was short Adani shares "through an agreement with an investment partner who was indirectly short Adani derivatives through a non-Indian offshore fund structure." It was fully disclosed that he was short of Adani shares, said.
On January 24, 2023, Hindenburg published a report alleging share manipulation and accounting fraud at the Adani group, calling it "the biggest scam in corporate history", ahead of a proposed Rs 20,000 crore share sale by of Adani Enterprises, the group's flagship company. .
Adani Group repeatedly denied the Hindenburg report, calling it malicious and baseless. The conglomerate has since recovered most of the stock market losses. In January this year, the Supreme Court ruled that the Adani Group will not face further investigations beyond the current scrutiny by Sebi, which encompassed a probe into the use of havens. tax and stock manipulation.
Hindenburg called Sebi's show cause notice "nonsense" and "concocted to serve a predetermined purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by India's most powerful individuals."
"After a year and a half of investigation, Sebi did not identify any factual inaccuracies in our Adani investigation. Instead, the regulator took issue with things like our use of the word 'scandal' when describing multiple previous cases of accused Adani promoters. "of fraud by Indian regulators. and our quote from an individual who alleged that Sebi is corrupt and works 'hand in hand' with conglomerates like Adani to help it circumvent regulations," he said. The US firm said the notice The cause of the show resolves some questions: "Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No, we had an investment partner, and net of costs, we can barely get by." above the break-even point in our Adani short.
"Our work at Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of," he said.
"To this day, Adani has still not addressed the allegations in our report, instead providing a response that ignored every key issue we raised and has offered blanket denials of subsequent media allegations," he said, adding that Its January 2023 report had "provided evidence of a vast network of offshore shell entities controlled by (group chairman) Gautam Adani's brother, Vinod Adani, and close associates." In Sebi's notice, it said: "Much of the notice seemed designed to imply that our legal and disclosed investment position was secret or insidious, or to present novel legal arguments claiming jurisdiction over us. Please note that we are a US-based research firm with no Indian entities, employees, consultants or operations.”
The regulator, he said, claimed that the report's disclaimers were misleading because the company was "indirectly participating in the Indian stock market."
"This was not a mystery, virtually everyone on earth knew that we were missing Adani because we revealed it prominently and repeatedly," he said.
