Kotak Group Fund named in Sebi notice owns over 1% in seven companies

Kotak Mahindra Group has clarified that Hindenburg Research was never a client of K India Opportunities Fund (KIOF) and Kotak Mahindra International Ltd (KMIL) and that the fund was unaware of the US short seller being a partner of any of its investors

A Kotak Group Fund named in the show cause notice issued by the Securities and Exchange Board of India (Sebi) to Hindenburg Research owns more than one percent stake in at least seven other firms listed on Indian bourses.

To be sure, K India Opportunities Fund Limited - Class F, which is the FPI named in the Sebi notice, is a sub-fund of Kotak Group's K India Opportunities Fund, which has a total of nine sub-funds, with each registered with the capital markets regulator as a separate FPI.

According to the Sebi notice, K India Opportunities Fund Limited – Class F, a Sebi-registered FPI, traded in the shares of Adani Enterprises before the report was published and then squared off its entire short position after the publication of the report, making a profit of Rs 183.24 crore or $22.25 million.

Also Read: Aamdani Atthanni…: How much money did Hindenburg make out of the Adani report?

Meanwhile, data from Ace Equities shows that K India Opportunities Fund Limited through another sub-fund called K India Opportunities Fund Limited Class S owns more than one percent in seven companies, namely Krsnaa Diagnostics, Mold-Tek Packaging, Poddar Housing and Development, Shilchar Technologies, KDDL Ltd., Vivimed Labs and Supreme Infrastructure India.

The cumulative value of the holdings in these seven companies is pegged at nearly Rs 362 crore.

The highest stake is in Supreme Infrastructure India where the fund owns shares representing 7.39 percent stake in the company. It holds between 2-3 percent in Krsnaa Diagnostics, Mold-Tek Packaging and Shilchar Technologies.

The fund may be holding stake in many other companies as well, but regulatory requirements make it mandatory to disclose the name of the shareholder only if the stake is more than one percent in a company.

Further, the other sub-funds may also be holding shares of Indian companies but the stake would less be one percent and hence would not come up in the database of Ace Equities.

Meanwhile, Kotak Mahindra Group has clarified that Hindenburg Research was never a client of K India Opportunities Fund (KIOF) and Kotak Mahindra International Ltd (KMIL) and that the fund was unaware of the US short seller being a partner of any of its investors.

Also Read: Kotak Group Fund says it wasn't aware that Hindenburg was partner of its investors

“K- India Opportunities Fund Ltd. (KIOF) is a SEBI registered Foreign Portfolio Investor and is regulated by the Financial Services Commission of Mauritius. The Fund, was established in 2013 to enable foreign clients to invest in India. The Fund follows due KYC procedures while onboarding clients and all its investments are made in accordance with all applicable laws. We have cooperated with regulators in relation to our operations and continue to do so,” said a spokesperson of Kotak Mahindra Bank.

“Kotak Mahindra International Limited (KMIL) and KIOF unequivocally state that Hindenburg has never been a client of the firm nor has it ever been an investor in the Fund. 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,” added the spokesperson.

Also Read: Hindenburg trashes Sebi show-cause notice as 'nonsense' and 'concocted'

According to the Sebi show cause notice, an investment advisory agreement was signed between Kingdon Capital – a client of Hindenburg Research -- and Kotak Mahindra (International) Ltd on January 5, 2023.

Kingdon Capital was the investment advisor to KMIL with respect to the investments of K India Opportunities Fund Limited Class F, stated the Sebi notice.