SEBI Investigation into Hindenburg Research and Adani Group: The Kotak Connection

GG News Bureau

New Delhi, 4th July.  In a significant development, the Securities and Exchange Board of India (SEBI) undertook an investigation into allegations against Hindenburg Research, a prominent short-seller, accusing it of conspiring to defame the Adani Group, one of Bharat’s largest conglomerates. The investigation revealed complex interconnections and brought into question the role of several financial entities, including Kotak Mahindra Bank.

The Allegations and SEBI’s Findings

Hindenburg Research published a report in January 2023, alleging financial irregularities and governance lapses within the Adani Group, which led to a substantial decline in Adani’s stock prices. The Adani Group refuted allegations made by Hindenburg Research in January 2023 that it had engaged in accounting fraud and stock manipulation. The Adani Group vehemently denied these allegations, calling them baseless and accusing Hindenburg of malicious intent aimed at manipulating the market. The study was made public shortly before the follow-on public offer (FPO) of Adani Enterprises Ltd. (AEL) for Rs 20,000 crore was scheduled to begin, but it was subsequently canceled.

SEBI’s investigation aimed to uncover the truth behind these claims and to determine if there was any foul play involved. The regulator’s probe extended to tracing financial transactions and identifying any entities that might have collaborated with Hindenburg in this alleged conspiracy.

SEBI’s Show Cause Notice for Hindenburg

Hindenburg describes the Sebi’s show cause notice as “nonsense, concocted to serve a pre-ordained purpose” and claims it is an attempt to intimidate and silence anyone who reveals fraud and corruption carried out by the most influential people in Bharat. The statement reads, “While Sebi apparently went to great lengths to assert its jurisdiction over us, it glaringly omitted to identify the party that actually has a connection to Bharat: Kotak Bank.”

The disclaimer that “fairly” explained “how we were short Adani—through a deal with an investor partner who was indirectly short Adani derivatives through a non-Bharatiya, offshore fund structure” is where Hindenburg goes on to clarify that Sebi took issue.

In the course of submitting a Right to Information (RTI) request, Hindenburg is looking for basic information on meetings and phone conversations between Sebi and Adani and its different representatives, as well as the identities of Sebi staff members who worked on the Adani matter and the Hindenburg subject.

 The ‘K’ Company Revelation.

 A few days before the report’s release, a foreign portfolio investor by the name of K India Opportunities Fund Ltd – Class F opened a trading account, began trading AEL’s shares, and eventually squared off its entire short position, according to the show-cause notice issued by SEBI. This ‘K’ company was found to be instrumental in facilitating some of the financial transactions and communications that were central to the short-seller’s operations against the Adani Group.

Hindenburg Research, in its defense, acknowledged SEBI’s findings but asserted that the ‘K’ company was an independent entity operating without direct association with the core activities of Hindenburg. Hindenburg also claims that the K in K India Opportunities Fund represents Uday Kotak’s original bank, Kotak Bank, which its investor partner used to place a wager against Adani.

Adani Short Positions Allegedly Brought Hindenburg Financial Gains

Aside from a meager $31,000 from their short position on Adani’s US bonds, Hindenburg revealed making $4.1 million in gross revenue from “gains related to Adani shorts from that investor relationship.” They took great satisfaction in the thoroughness of their investigation of Adani, highlighting the comparatively small size of these roles.

 Kotak Mahindra Bank’s Denial

In response to SEBI’s revelations, Kotak Mahindra Bank issued a statement denying any involvement in the conspiracy against the Adani Group. The bank clarified that while there was an investment in Kingdon Capital, a fund implicated in SEBI’s findings, this did not equate to direct involvement or endorsement of Kingdon’s actions.

Kotak Mahindra Bank emphasized its commitment to ethical practices and adherence to regulatory norms. The bank’s spokesperson stated, “Kotak Mahindra Bank has no direct or indirect involvement in any activities related to the allegations against Hindenburg Research and the Adani Group. Our investment in Kingdon Capital is purely financial and does not imply participation in their decision-making processes.”

Kingdon Capital’s Role

Kingdon Capital, an investment firm, was identified by SEBI as having played a role in the transactions linked to the Hindenburg report. Before the report on Adani Group was made public, Hindenburg allegedly gave Kingdon Capital Management a draft copy, which SEBI claimed was evidence of collusion.

The proprietor of Kingdon Capital, Mark Kingdon, allegedly subsequently established a fund called K Indian Opportunities Fund that could trade Bharatiya stocks, according to SEBI. While SEBI’s findings did not conclusively establish that Kingdon Capital had acted with malicious intent, the firm’s involvement raised questions about the broader network of financial actors surrounding the case.

SEBI’s Reaction

SEBI has not responded to Hindenburg’s argument in the public domain or confirmed the legitimacy of the show cause order. At this point, Kotak Mahindra Bank representatives have not replied to requests for comment.

Adani Group’s Reaction to Hindenburg’s Report

Considerable market value losses, potentially reaching $150 billion for Adani’s firms, were caused by Hindenburg’s January 2023 research, which claimed that the Adani Group engaged in stock manipulation and accounting violations. Adani’s stock prices have now recovered, but the group still rejects these claims, calling them nasty and untrue.


The SEBI investigation into the Hindenburg-Adani affair underscores the complexities of financial markets and the potential for both legitimate and illegitimate activities within them. While Hindenburg Research and Kotak Mahindra Bank have both distanced themselves from direct wrongdoing, SEBI’s findings have highlighted the need for stringent regulatory oversight and transparency in financial transactions.

As the investigation continues, the broader implications for market integrity and the reputations of the entities involved remain significant. This case serves as a reminder of the intricate web of relationships in the financial sector and the critical role of regulatory bodies in maintaining market fairness and accountability

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