Kotak AMC Dismisses Hindenburg Allegations: Know All About Hindenburg-Adani Controversy

The US-based research firm and short-seller Hindenburg Research has never been a client or investor in Kotak Mahindra International Limited (KMIL), the Asset management company clarified today. It was reacting to the Hindenburg mentioning 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 adding it 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.

How Kotak Mahindra Entered Controversy?

The controversy erupted after Hindenburg strongly responded to Sebi's show cause notice, denying the allegations made by the regulator. Sebi's notice on June 27, 2024, alleged that Hindenburg and Anderson violated regulations under the SEBI Act, SEBI's Prevention of Fraudulent and Unfair Trade Practices regulations, and SEBI's Code of Conduct for Research Analyst regulations.

Responding strongly to the SEBI's notice, Hindenburg Research called Sebi's notice "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."

Hindenburg Research questioned why the Securities and Exchange Board of India (Sebi) omitted the name of private sector lender Kotak Mahindra Bank in its entirety from the notice and just mentioned 'KMIL' suggesting bias. It said Kotak Mahindra Bank managed an offshore fund structure employed by Hindenburg’s investor partner to short Adani stocks and said it earned USD 4.1 million by shorting Adani securities for its client, but stated that this amount would barely cover the costs of producing the research.

Hindenburg also accused Sebi of pressuring brokers to close short positions in Adani, creating buying pressure on the crucial day of the report.  Hindenburg's justification says it had disclosed its short position on Adani shares, allowing readers to consider potential biases in publishing the report.

Background

In January 2023, Hindenburg published a research report accusing Adani group companies of stock manipulation and accounting fraud and making gains as they had already shorted Adani stocks. Later in January 2024 Supreme Court dismissed requests for creating a special investigation team (SIT) or a Central Bureau of Investigation (CBI) probe into the Hindenburg allegations.  against the Adani Group to the  (CBI). Now Sebi's show cause notice may lead to an increase in confidence among investors regarding Adani group companies.

Adani Energy Solutions was among the major gainers today at NSE Ltd after the energy utilities company gained 2.56 per cent or Rs 25 to reach Rs 1,024 per scrip.