This week, an interesting twist occurred in the ongoing feud between Hindenburg Research and the Adani Group. Hindenburg accused Kotak Mahindra Bank, a major Indian lender, of having links with an offshore fund as its response to a show-cause notice from Securities and Exchange Board of India (Sebi).
In 2023, Hindenburg accused Adani Group of underhand tricks and financial shenanigans. This caused the biggest fall of Adani Group shares prices in India’s stock market. After that till now an enquiry on Adani’s dealings by Sebi notwithstanding, Adani Group has remained adamant blocking off all these allegations.
Now, Hindenburg’s response to Sebi’s notice throws a new wrinkle into the story. They claim Sebi issued the notice over alleged violations related to their short positions in Adani Group companies. However, Hindenburg alleges that Sebi conveniently omitted mentioning Kotak Mahindra Bank (KMIL), who acted as an “investor partner.”
According to Hindenburg, this “investor partner” used an offshore fund structure to short sell Adani Group shares. Interestingly, Hindenburg claims that brokerage firms founded by Uday Kotak, the head of Kotak Mahindra Bank, created and oversaw this offshore structure. Uday Kotak also led Sebi’s 2017 Committee on Corporate Governance, raising questions about potential conflicts of interest.
Hindenburg goes a step further, alleging that Sebi attempted to mask Kotak’s involvement by referring to the offshore fund as “K-India Opportunities Fund” instead of its full name, which likely includes “Kotak Mahindra Investment Limited” (KMIL). This alleged attempt to obfuscate raises concerns about transparency in the investigation.
Hindenburg’s response accuses Sebi of attempting to “protect yet another powerful Indian businessman” by not mentioning Kotak Bank. They further allege that Sebi seems more interested in pursuing those who expose questionable practices rather than investigating the Adani Group itself.
Sebi, on the other hand, has not to respond to Hindenburg’s specific charges concerning Kotak Bank’s participation or the usage of KMIL as an abbreviation.
This new development adds a layer of complexity to the ongoing saga.The involvement of a large Indian bank, as well as the possibility of a regulatory conflict, raise concerns about the investigation’s transparency and fairness. Investors are eagerly monitoring how Sebi responds to these claims and how it will move with its probe into both the Adani Group and the Hindenburg allegations.
The resolution of this case might have serious consequences for the Indian stock market and corporate governance procedures in the nation.
