Hindenburg gets Sebi notice on Adani bets
Mkt regulator seeks details over alleged violations in short selling bets on Adani stocks; US short seller terms it as nonsense
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Hindenburg further stated that Kotak Bank created and oversaw an offshore fund structure that was used by its ‘investor partner’ to short shell Adani stocks, but hastened to add that it may ‘barely come out above breakeven’ on its trade
New Delhi: India’s markets regulator 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. The Securities and Exchange Board of India (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.
Hindenburg, which published the notice on its website, said it made just $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, the asset management company. KMIL’s K-India Opportunities Fund created positions in Adani Enterprises Ltd prior to the report release and a total profit of Rs183.24 crore ($22.25 million) thereafter.
Hindenburg had shared its report with Kingdon Capital prior to the release, that led to a rout in Adani group stock, wiping out over $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.
Hindenburg said the Sebi’s notice is nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India. A show-cause notice is often a precursor to formal legal action that may include imposing financial penalties and barring participation in the Indian capital market. Sebi has given Hindenburg 21 days to respond to its allegations.
