Hindenburg Research has responded to a show cause notice from Sebi, adding a new twist to the saga involving its report on the Adani Group.
The US-based short seller alleged that the market regulator did not name the private lender involved in short selling Adani group shares.
Hindenburg said that brokerage firms founded by Uday Kotak created and managed the offshore fund structure used by its investor partner to bet against Adani group shares.
It mentioned that Sebi only referred to the K-India Opportunities fund and used the acronym 'KMIL' to mask the 'Kotak' name.
"While Sebi tried to claim jurisdiction over us, its notice did not name the party actually tied to India: Kotak Bank, one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and managed the offshore fund structure used by our investor partner to bet against Adani. Instead, it named the K-India Opportunities fund and masked the 'Kotak' name with the acronym 'KMIL,'" Hindenburg said in a blog post.
It said that KMIL stands for Kotak Mahindra Investment.
"We suspect Sebi's omission of Kotak or any Kotak board member may be to protect yet another powerful Indian businessman from scrutiny, a role Sebi seems to embrace," Hindenburg added.
In 2023, Hindenburg Research said that it held short positions in Adani Group companies through US-traded bonds and non-Indian-traded derivatives but did not reveal the size of its bets or the specific derivatives and reference securities used.
Hindenburg’s new note said that Uday Kotak, the bank’s founder, personally led Sebi's 2017 committee on corporate governance.
Hindenburg Research alleged that much of Sebi's notice was intended to suggest that its legal and disclosed investment stance was secretive or dubious, or to present new legal arguments claiming jurisdiction over it.
"Note that we are a US-based research firm with no Indian entities, employees, consultants, or operations. Some of these arguments seemed circular," Hindenburg added.
Hindenburg said the regulator claimed the disclaimers in its report were misleading because it was indirectly participating in the Indian securities market, and therefore, was short Adani.
"This was no secret—everyone knew we were short Adani because we disclosed it prominently and repeatedly," the research firm said.
Hindenburg Research said it wanted to learn more about Sebi's process and was ready to file a Right to Information (RTI) request seeking the names of Sebi employees involved in both the Adani and Hindenburg matters, along with details of meetings and calls between Sebi, Adani and its representatives.
