News Brief

Kotak Group Fund Says It Wasn't Aware Of Hindenburg's Partnership With Its Investors—All About It

Kuldeep Negi

Jul 02, 2024, 03:07 PM | Updated 03:07 PM IST

Adani Group. (Representative image).
Adani Group. (Representative image).

Kotak Mahindra International Limited (KMIL) clarified on Tuesday (2 July) that Hindenburg Research has never been a client or investor in their fund.

This statement followed Hindenburg Research's mention of Kotak Mahindra Bank in its response to a show-cause notice from the Securities and Exchange Board of India (Sebi).

“Kotak Mahindra International Limited (KMIL) and KIOF unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the Fund," said the company.

"The Fund was never aware that Hindenburg was a partner of any of its investors. KMIL has also received a confirmation and declaration from the Fund’s investor that its investments were made as a principal and not on behalf of any other person," it added, India Today reported.

KMIL highlighted that K-India Opportunities Fund Ltd (KIOF) adheres to strict Know Your Customer (KYC) procedures when onboarding new clients.

The company ensures that all investments comply with the relevant laws.

They stressed that KIOF is a Sebi-registered Foreign Portfolio Investor and is regulated by the Financial Services Commission of Mauritius.

Established in 2013, the Fund aims to help foreign clients invest in India.

“We have cooperated with regulators in relation to our operations and continue to do so," the company stated.

US-based Hindenburg Research on Tuesday claimed that Kotak Mahindra Bank created and oversaw the offshore fund structure used by its investor partner to short Adani stocks, according to an update from the short-seller on Tuesday (2 July).

Hindenburg Research raised questions about why the Securities and Exchange Board of India (SEBI) failed to mention Kotak Mahindra Bank in its observations.

“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',” Hindenburg said, Moneycontrol reported.

In a blog post, Hindenburg Research also disclosed earning $4.1 million in revenue from gains made by shorting Adani securities on behalf of its client.

Despite this, Hindenburg mentioned that this amount barely covers the costs of producing their research.

"We have made ~$4.1 million in gross revenue through gains related to Adani shorts from that investor relationship. We made just U.S. $31,000 through our own short of Adani U.S. bonds held into the report," said Hindenburg in the blog post.

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Kuldeep is Senior Editor (Newsroom) at Swarajya. He tweets at @kaydnegi.

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