After Adani bombshell last year, Hindenburg Research has hinted at another ‘big’ India reveal. The US short seller on Saturday, in a post on X (formerly Twitter), said, “Something big soon India.”
On January 24 last year, Hindenburg Research published a report sharply criticizing the Adani Group just before the planned share sale of Adani Enterprises. The report led to an $86 billion decline in the market value of Adani Group’s stocks and triggered a significant sell-off of its overseas listed bonds.
— HindenburgRes (@HindenburgRes)
Recent Kotak involvement
The Securities and Exchange Board of India (SEBI) has revealed new developments in the ongoing Adani-Hindenburg saga, shedding light on the connections between the US-based short-seller Hindenburg Research and New York hedge fund manager Mark Kingdon. According to SEBI, Hindenburg shared an advance copy of its report on the Adani Group with Kingdon approximately two months before its public release, enabling significant profits through strategic trading.In a detailed 46-page show-cause notice, SEBI highlighted that Hindenburg and Kingdon Capital Management entered into a “Research Agreement” in May 2021. This agreement facilitated the sharing of the draft report, which was nearly identical to the final version published in January 2023. The report accused the Adani Group of orchestrating “the largest con in corporate history,” leading to a market value decline of over $150 billion across Adani’s listed companies.
SEBI’s notice
SEBI’s notice reveals that Kingdon Capital, with substantial stakes in Kotak Mahindra Investments Limited (KMIL), profited from the market turbulence caused by the report. Kingdon Capital reportedly transferred $43 million to establish short positions in Adani Enterprises Ltd (AEL) prior to the report’s release, later closing these positions for a profit of $22.25 million. Additionally, the notice includes time-stamped chats between hedge fund employees and Kotak Mahindra Investments Limited traders regarding the sale of futures contracts in Adani Enterprises.
The report’s release on January 24, 2023, led to a significant drop in AEL’s stock price, which fell by 59% from Rs 3,422 to Rs 1,404.85 per share within a month. SEBI’s findings indicate that the K India Opportunities Fund Ltd—controlled by Kingdon—initiated trading in AEL derivatives shortly before the report was published and capitalized on the subsequent market reaction.
In its defense, Kingdon Capital asserted that it was legally permitted to enter into such research agreements, allowing it to receive and act upon reports before they were publicly disseminated. Kotak Mahindra Bank, on its part, denied any prior knowledge of Kingdon’s relationship with Hindenburg or involvement in the use of price-sensitive information.
Hindenburg, responding to SEBI’s allegations, criticized the regulator’s approach, arguing that the notice was an attempt to “silence and intimidate” those exposing corruption. The short-seller also accused SEBI of focusing on Hindenburg’s activities while neglecting to investigate the Adani Group’s alleged financial misconduct.
The notice is a precursor to potential legal actions, which could include financial penalties and restrictions on market participation for those involved. Hindenburg has been given 21 days to respond to SEBI’s allegations.
Meanwhile, senior lawyer Mahesh Jethmalani had alleged a potential Chinese connection to the saga, claiming that Kingdon’s wife, Anla Cheng, is a Chinese spy. These claims, though unverified, had added another layer of complexity to an already intricate case.
