The US-based short-seller Hindenburg Research said on Monday that the Security Exchange Board of India (SEBI), India’s securities market regulator, had sent it a letter outlining suspected violations over its short bet against Adani Group last year and revealed it may “barely come out above break-even” on its trade.
Hindenburg also said Kotak Bank created and oversaw an offshore fund structure that was used by its “investor partner” to bet against the conglomerate, providing new details of trades that have puzzled investors.
The short-seller said it made $4.1 million in gross revenue through “gains related to Adani shorts from that investor relationship” and just $31,000 through its short position of Adani’s US bonds. It did not name the investor.
Characterising the SEBI “show cause” notice as attempted intimidation, Hindenburg wrote that the regulator had made the “nebulous allegation” that Hindenburg’s report contained misrepresentations and inaccurate statements meant to mislead readers.
“In our view, SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimized by it,” Hindenburg said.
SEBI, Adani Enterprises and Kotak did not immediately respond to a request for comment outside working hours.
SEBI has also been probing Adani, but India’s top court has given it till August 14 to complete its investigation.
The disclosure of the SEBI notice adds a new twist in the saga unleashed last year when Hindenburg, founded by Nathan Anderson, alleged improper business dealings by Adani.
The group, which refuted the allegations, suffered a loss of as much as $150 billion in combined market value after the report, but has since rebounded.
Hindenburg’s response also sheds some new light on the mechanics of its trade, the details of which had intrigued other investors because Indian securities rules make it hard for foreigners bet against companies there.
“It was a tiny position,” it said. “But, to date, our research on Adani is by far the work we are most proud of.”