The shares of Kotak Mahindra Bank declined as much as 3% on Tuesday as Hindenburg research named the bank in response to the show cause notice from Indian market regulator SEBI.
Hindenburg alleged that 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.
The US short seller disclosed that Kotak Bank created and oversaw an offshore fund structure that was used by its "investor partner" to be against the conglomerate but hastened to add that it may "barely come out above breakeven" on its trade.
Hindenburg further added that the investor partner 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 the conglomerate's US bonds.
"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 said.
Hindenburg described the show cause notice as "nonsense" and claimed it was an attempt to "silence and intimidate" those exposing corruption and fraud by powerful individuals in India.
The New York-based firm reiterated that when it released its report alleging long-term stock manipulation and accounting fraud by the Adani group, it had disclosed its short position on Adani stocks.
"After 1.5 years Of investigation, SEBI identified zero factual inaccuracies with our Adani research. Instead, the regulator took issue with things like our use of the word 'scandal' when describing multiple prior instances of Adani promoters being charged with fraud by Indian regulators, and our quoting of an individual that alleged SEBI is corrupt and works 'hand in glove' with conglomerates like Adani to help it skirt regulations," Hindenburg said.
Also watch: Hindenburg Research receives show cause notice from SEBI over Adani stock bets