'Another powerful Indian businessman': What Hindenburg says on Uday Kotak, offshore fund & Adani group shares
'Another powerful Indian businessman': What Hindenburg says on Uday Kotak, offshore fund & Adani group shares
After receiving a show cause notice from Sebi on the Adani case, Hindenburg Research said Sebi seemingly tied the US-based short seller in knots to claim jurisdiction over it but conspicuously failed to name the party that has an actual tie to India: Kotak Mahindra Bank.
Hindenburg said brokerage firms founded by Uday Kotak created and oversaw the offshore fund structure, which was used by its investor partner to bet against Adani group shares. Hindenburg said Sebi simply named the K-India Opportunities fund and masked the 'Kotak' name with the acronym 'KMIL'.
KMIL stands for Kotak Mahindra Investment.
It noted that 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," it said.
Hindenburg Research alleged that much of the Sebi's notice seemed designed to imply that its legal and disclosed investment stance was something secret or insidious, or to advance novel legal arguments claiming jurisdiction over it.
"Note that we are a US-based research firm with zero Indian entities, employees, consultants or operations. Some of these arguments seemed circular," Hindenburg said.
The regulator, Hindenburg said, claimed that the disclaimers in Hindenburg's report were misleading because it was indirectly participating in the Indian securities market, and, therefore, were short Adani.
"This wasn’t a mystery—virtually everyone on earth knew we were short Adani because we prominently and repeatedly disclosed it," it said.
Hindenburg Research said it was looking to learn more about the Sebi's process and that it was ready to file an RTI seeking the names of Sebi employees that worked on both the Adani matter and the Hindenburg matter, along with basic details on meetings and calls between Sebi and Adani and its various representatives.
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