Hindenburg Research gets notice from SEBI, calls it ‘intimidation bid’
New Delhi, July 2
India’s markets regulator Securities and Exchange Board of India (SEBI) has slapped Hindenburg Research with a show-cause notice for alleged “unfair trade practices” in its 2023 broadside against the Adani Group — a move that the US firm termed as ‘nonsense’ and an attempt to ‘silence and intimidate’ those exposing corruption.
Short seller never been a client: Kotak
Kotak Mahindra Investments Ltd, the asset management company, said Hindenburg was “never” its client. SEBI’s show-cause notice said Hindenburg’s client Kingdon Capital Management had invested in KMIL’s K-India Opportunities Fund, which created positions in Adani Enterprises prior to the report release and made “a profit of Rs 183.24 cr.
Bank ‘aided’ investor during adani share fall
- Uday Kotak founded bank as well as brokerage created and oversaw an offshore fund used by unnamed investor to profit from a plunge in Adani shares that followed a Hindenburg report, US short seller said
- Calling the SEBI show-cause notice as attempted intimidation, Hindenburg asked why the market regulator did not name Kotak
- SEBI notice “failed to name party that has an actual tie to India: Kotak Bank, which created the offshore fund structure used by our investor partner to bet against Adani,” Hindenburg said
The SEBI in the June 26 show-cause notice charged Hindenburg of “deliberately sensationalising and distorting certain facts” in the damning January 2023 report on the Adani group as well as working with a New York hedge fund to make its bet. SEBI has given Hindenburg 21 days to respond to its allegations.
Hindenburg, which published the notice on its website, said it made just USD 4.1 million from its declared positions on Adani stocks and criticised the regulator for not focusing its investigation into the January 2023 report “providing evidence” of the conglomerate creating “a vast network of offshore shell entities” and moving billions of dollars “surreptitiously” into and out of Adani public and private entities.
It said while SEBI was seeking to claim jurisdiction over a US-based investor, the regulator’s notice “conspicuously failed to name the party that has an actual tie to India: Kotak Bank”, which created and oversaw the offshore fund structure used by Hindenburg’s investor partner to bet against Adani. The regulator “masked the “Kotak” name with the acronym “KMIL”,” it added. KMIL refers to Kotak Mahindra Investments Ltd.
While KMIL stated that Hindenburg was “never” its client, SEBI’s show-cause notice said that Hindenburg’s client Kingdon Capital Management had invested in KMIL’s K-India Opportunities Fund, which created positions in Adani Enterprises prior to the report release and made “a profit of Rs 183.24 crore ($22.25 mn)” thereafter.
Hindenburg had shared its report with Kingdon Capital prior to the release, which led to a rout in Adani group stocks, wiping out over USD 150 billion in market value of the 10 listed entities at their lowest point. Adani has repeatedly denied all allegations of wrong doing and most of its stocks have recouped losses since.
“KMIL and KIOF unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the fund,” a KMIL spokesperson said.
Hindenburg said the SEBI’s notice “is an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.” Hindenburg said it first received an email from SEBI and later a show-cause notice outlining suspected violations of Indian regulations.
