Sebi exposes Hindenburg that accuses Kotak of helping defame Adani

Sebi says Hindenburg Research played tricks to short-sell Adani but the short-seller says an Indian company, the Kotak group, helped it in the process

Surajit Dasgupta
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In a dramatic turn of events, the Securities and Exchange Board of India or SEBI has exposed the conspiracy of short-seller Hindenburg Research, whose bid to defame the Adani group shook the Indian market to its core last year. At the heart of this seismic controversy is Kotak Mahindra Bank, which Hindenburg alleges conspired with it to defame India’s biggest conglomerate – the Adani Group. According to Hindenburg, a certain ‘K’ in the SEBI report referred to Kotak, which the political dispensation is trying to safeguard from a fresh scandal. But was SEBI referring to Kotak at all?

The SEBI investigation unearthed a web of deceit and financial manipulation. The market watchdog has issued a show-cause notice to Hindenburg Research after its investigation revealed that ‘K’ for Kingdon Capital Management LLC and its entities played a pivotal role in aiding Hindenburg. Together, they orchestrated a scheme to short Adani Enterprises Ltd’s futures contracts, capitalizing on non-public information.

Mark Kingdon, owner of Kingdon Capital, conspired with Hindenburg, agreeing to take a 25% profit cut from shorting. This scheme raked in millions, all based on a foundation of deceit.

Did Sebi try to protect Kotak?

On its part, Hindenburg Research alleges that the SEBI’s notice “conspicuously failed to name the party that has an actual tie to India: Kotak Bank”. Instead, it simply named the K-India Opportunities Fund and masked the “Kotak” name with the acronym “KMIL”, the short-seller said. That may not be true.

Kotak has issued a statement that essentially says, “What the hell are you talking about? We have no idea what transpired in Hindenburg and how Adani was targeted.” In other words, Kotak says that KMIL refers to no Kotak company whatsoever.

But the plot thickens. Uday Kotak’s firm, Kotak Mahindra Bank, became embroiled in this scandal by entering into an investment advisory agreement with Kingdon Capital. Funds were funnelled through offshore accounts, building a massive short position against Adani.

With the release of Hindenburg’s defaming report, Adani’s stock plummeted, allowing KIOF Class F to pocket a staggering Rs 183.24 crore in profits.

Leaked chats from Kotak Mahindra executives reveal a calculated plan to set up offshore funds, route money, and profit immensely from Adani’s downfall.

SEBI’s notice dismantles Hindenburg’s report, exposing it as a concoction of lies and misrepresentations. Yet, rather than facing the evidence, Hindenburg lashes out, accusing SEBI of bias.

Hindenburg, despite claiming extensive research, relied on dubious sources and sensationalist narratives. They downplay their profits, but SEBI’s investigation paints a different picture – one of greed and manipulation.

SEBI uncovered that Hindenburg also profited from shorting ETFs and options on the MSCI India Index and trading bonds of Adani’s companies, making an additional $9.2 million.

Hindenburg’s report baselessly alleged government corruption and relied on banned brokers. Their reckless tactics and sensationalism cast a dark shadow over forensic financial research.

As SEBI continues its probe, the world watches closely. Will justice prevail? Will those who sought to profit from deceit face the consequences? The truth is out, and the stakes have never been higher. Adani has recovered, but that does not mean Hindenburg should be spared.

Kotak Mahindra Bank Hindenburg research Adani Sebi