Shares of Kotak Mahindra Bank rose over 1% in opening trade on Wednesday, after paring over 2% in the previous session, following clarification by the private lender in response to a show cause notice received from SEBI in the Adani-Hindenburg matter. The SEBI’s allegations relate to short selling of Adani Group stock following the publication of an adverse report by Hindenburg on January 25, 2023, against billionaire Gautam Adani-led companies.

In a clarification to exchanges, the bank, founded by billionaire banker Uday Kotak, said that U.S.-based short seller Hindenburg Research was never a Kotak Mahindra International Limited (KMIL) client nor an investor in K- India Opportunities Fund Ltd. K- India Opportunities Fund Ltd (KIOF)-Class F is a Mauritius-based SEBI registered foreign portfolio investor managed by KMIL.

“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,” says Kotak Mahindra Bank’s spokesperson.

The bank issued the clarification after Hindenburg, in its reply to the SEBI's show-cause notice, said Kotak Mahindra group created and oversaw the offshore fund structure used by its investor partner to short Adani stocks. However, the claim was later denied by the Kotak Mahindra group.

On June 26, 2024, capital market regulator SEBI issued a show cause notice to Hindenburg, Kingdon, persons related to them, as well as KIOF, which was received by KMIL on July 2, 2024.

Kotak Bank clarified that “the transactions in respect of which the above allegations are being made were made by the Fund on the advice, and for the benefit, of its investor Kingdon”.

“KMIL was informed by Kingdon that the transactions were made on a principal basis, i.e. for themselves. Kingdon never disclosed that they had any relationship with Hindenburg nor that they were acting on the basis of any price sensitive information. In fact, they had expressly confirmed that any advice from Kingdon to invest would be basis purely public information,” the bank said in the exchange filing.

“Neither the Fund nor KMIL were aware that Kingdon entities, which include a U.S. SEC registered investment advisor, in respect of whom KYC as per law was duly performed, had any association with Hindenburg. The Fund and KMIL had no prior knowledge of the publication of the aforesaid Hindenburg report. We deny any allegation of being aware of such report or acting in collusion in any manner with Kingdon or Hindenburg,” it added.

Following this clarification, shares of Kotak Mahindra Bank gained as much as 1.6% to ₹1,799.90, while its market capitalisation climbed to ₹3.57 lakh crore.  On Tuesday, the share price of the private lender ended 2.16% lower at ₹1,769.60 with a m-cap of ₹3.51 lakh crore. The stock touched its 52-week high of ₹1,987 on July 21, 2023, and a 52-week low of ₹1,544.15 on May 3, 2024. In the last one year, the stock has fallen nearly 3%, while it lost around 4% in six months. The counter has gained around 5% in the last one month. 

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