Kotak Mahindra Bank Ponders Whether Kingdon Capital Misrepresented Connection With Hindenburg

Kotak Mahindra Bank is reportedly evaluating the possibility of being misled by Kingdon Capital concerning its connections with Hindenburg Research in shorting Adani Group stocks.

What Happened: The bank, which is currently under the scanner of the Securities and Exchanges Board of India (SEBI) for facilitating a foreign portfolio investor (FPI) licence for Kingdon Capital, is probing whether the latter’s statements were deceptive, reported Moneycontrol, citing sources.

Kindgon allegedly had access to Hindenburg’s report before it was published. The bank has reportedly received a show-cause notice from SEBI in this regard.

The private lender will take a call on whether to take legal action against Kingdon Capital after the evaluation, the report said.

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Kingdon Capital had said that all its trades in Adani group companies were “principal trades”. According to the current regulations, off-shore funds like Kingdon Capital are only allowed to take “proprietary trades” which means investing on behalf of itself and not for a third party.

SEBI’s investigation has found that Kingdon Capital reportedly had a profit-sharing agreement with Hindenburg Research. This implies that a portion of the funds used in the trades was on behalf of the US-based short-seller. On July 2, Hindenburg revealed it received show cause notice from SEBI related to its research and short-selling Adani Group firms.

In January 2023, Hindenburg Research had levelled serious allegations against the Adani group, accusing it of corporate governance violations and market manipulation.

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