Kotak Group Fund on Hindenburg claims: ’Wasn’t aware that Hindenburg was partner of its investors’

Kotak Mahindra Bank on Tuesday clarified that Hindenburg Research was never a client of Kotak group’s K- India Opportunities Fund Ltd. (KIOF) and Kotak Mahindra International Limited (KMIL) and that the fund was never aware of it being a partner of any of its investors.

The clarification comes after the US short-seller Hindenburg had earlier said that the Kotak Mahindra Bank and brokerage firms founded by Uday Kotak created and oversaw the offshore fund structure used by the investor partner of Hindenburg to bet against Adani group stocks.

“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. The Fund was never aware that Hindenburg was a partner of any of its investors,” Kotak Mahindra Bank spokesperson said on July 2.

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, the group statement added.

K- India Opportunities Fund Ltd. (KIOF) is a SEBI registered Foreign Portfolio Investor and is regulated by the Financial Services Commission of Mauritius. The Fund was established in 2013 to enable foreign clients to invest in India.

“The Fund follows due KYC procedures while onboarding clients and all its investments are made in accordance with all applicable laws. We have cooperated with regulators in relation to our operations and continue to do so,” the statement said.

Hindenburg had questioned on capital market regulator Sebi's failure to take Kotak’s name in its observations and alleged that the omission may be meant to protect the businessman from scrutiny.

“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.

“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,” Hindenburg added.