Kotak Mahindra Bank said on Tuesday it was unaware that Hindenburg Research was a partner in an offshore fund that allegedly profited from the fall in the shares of Adani Enterprises Ltd (AEL) pursuant to the damaging accusations made by the US short-seller in its January 24, 2023 report.

The Mauritius-based entity at the centre of this fresh development is K- India Opportunities Fund Ltd (KIOF)-Class F.

Sebi in its show-cause notice to US short-seller Hindenburg claimed that prior to the release of the Hindenburg report, KIOF-Class F had opened a trading account and began trading in the AEL scrip before the report was published. It then squared off the entire position after the publication of the report, making profits of ₹183.24 crore.

Responding to Sebi’s show-cause notice, Hindenburg said in a statement that it was Kotak Mahindra Bank which created and oversaw the offshore fund structure used by its investor partner to bet against Adani.

“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,” a spokesperson from Kotak Bank said.

The lender added that KIOF is a Sebi registered foreign portfolio investor (FPI) and is regulated by the Financial Services Commission of Mauritius.

It further disclosed that the fund was established in 2013 to enable foreign clients to invest in India. KIOF follows due KYC (know-your-customer) 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,’’ the bank added.

Sebi’s show-cause notice said KIOF-Class F built short positions for 8.50 lakh shares on January 10, January 11 and January 20, which were few days before the publication of the Hindenburg report.

While it squared off these positions, it created fresh short positions in the February 2023 contract. It then again exited the positions with effect from February 1, 2023 till February 22, 2023 making gains of over ₹183 crore.

According to the market regulator, by rolling over positions from the January contract to the February contract just few days before the expiry of the January contract (January 25, 2023), the FPI expected to make a profit from the anticipated price fall on account of the impending release of the Hindenburg report. “This shows that the FPI had advance knowledge of the timing of the publication of the report,’’ the show-cause notice issued to Hindenburg said.

For Kotak Mahindra Bank, the fresh accusations come more than two months after the RBI barred the lender from acquiring new customers through its online and mobile banking channels and issuing new credit cards.