Kotak Created Offshore Fund Structures to Bet Against Adani: Hindenburg, Says SEBI is Protecting the Powerful Businessman

Mumbai : In a shocking revelation, Hindenburg Research has named Uday Kotak as the individual who facilitated a bet against Adani for its client, Kingdon Capital. The New York-based short seller has also accused the Securities and Exchange Board of India (SEBI) of protecting Uday Kotak.

“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,” said Hindenburg in response to the show-cause notice from SEBI.

The regulator’s notice mentioned that an agreement was signed between Kotak Mahindra International Ltd (KMIL) and Kingdon Capital, Hindenburg’s only client that bet against Adani on January 5, 2023, roughly 20 days prior to the publishing of the report against the Adani Group. However, the notice does not elaborate on Uday Kotak or his role in the bet against Adani.

Hindenburg has claimed that Kotak specifically created a structure to facilitate the short sale against Adani. “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, one of India’s largest banks and brokerage firms founded by Uday Kotak, which 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’,” accused Hindenburg.

Relevant extracts of chats between employees of KMIL (Neeraj Malhotra, CEO, and Ankur Agarwala, VP) and employees of Kingdon Capital (Eric Kirby, Head of Trading, and Peter Reilly, Trader) are part of the show-cause notice.

According to the activist short seller, SEBI is protecting Uday Kotak. “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,” stated Hindenburg.