Hindenburg Drags Kotak Bank In Controversy; Responds To Sebi’s Notice
Sebi is screening Kotak Bank’s role in Adani shares short selling, alleges Hindenburg
In a statement posted to its website, U.S.-based short-seller Hindenburg provided a copy of a 46-page show cause notice from the Securities and Exchange Board of India (Sebi).
Development came just after a few days after the show cause notice issued by Sebi to Hindenburg asking about the matter of trading activities of certain entities in the scrip of Adani Enterprises immediately preceding and after the post-publication of the Hindenburg report.
“On the morning of 27 June 2024, our firm received a bizarre email, ostensibly from Sebi. Later that day we received another email, again ostensibly from Sebi, with a ‘show cause’ notice, a letter from the regulator outlining suspected violations of Indian regulations,” stated Hindenburg in response to Sebi’s show cause notice.
The statement further added, today we are sharing the entirety of this notice frankly because we think it is nonsense, concocted to serve a pre-ordained purpose.
Now, in its reply, Hindenburg accused Sebi screening of Kotak Mahindra Bank and said that Sebi has no jurisdiction over Hindenburg as its US-based firm.
It claimed on its website, “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 created and oversaw the offshore fund structure used by our investor partner to bet against Adani. Instead, it simply named the K-India Opportunities fund and masked the ‘Kotak’ name with the acronym ‘KMIL.’
Adding to its allegation Hindenburg said, “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.”
These all developments are related to the Hindenburg report on the Adani group which came last year on 24 January 2023. In the report, US-based short-selling firm Hindenburg accused the Adani group of financial mismanagement and stock manipulation. The report led to the loss of more than USD 80 billion within days for the Adani group.
