Nomura Holdings Sued by Adani-Linked Fund Over Loan Dispute in London Court
Nomura Holdings faces a London lawsuit from Elara Capital's Oyster Bay Fund over loan disputes involving Adani Group investments. The fund claims $43 million losses after Nomura allegedly breached repayment terms by selling pledged Adani shares as collateral following Hindenburg Research's January 2023 report. The case highlights ongoing fallout from allegations that eroded over $150 billion from Adani Group's market value.
*this image is generated using AI for illustrative purposes only.
Nomura Holdings Inc. faces legal action in London over loans extended to an investment fund with significant exposure to Adani Group companies. The lawsuit, filed by Oyster Bay Fund Ltd., owned by Elara Capital Plc, centers on disputed loan arrangements that came under pressure following a damaging short-seller report in January 2023.
Background of the Dispute
The legal case stems from Nomura's lending relationship with Oyster Bay Fund, which had borrowed money for stock investments in Adani Enterprises Ltd. and Adani Ports & Special Economic Zone Ltd. The situation escalated after Hindenburg Research published a report in January 2023 accusing Adani's empire of "brazen stock manipulation" and alleging Elara's involvement in questionable practices.
Following the Hindenburg report, shares in Adani companies experienced significant declines, prompting concern among Nomura's senior bankers in Asia who sought to reduce their loan exposure to the fund.
Financial Claims and Allegations
The dispute involves substantial financial claims from both parties:
| Financial Details: | Amount |
|---|---|
| Cash Demand by Nomura: | $205.00 million |
| Claimed Losses by Oyster Bay: | $43.00 million |
| Adani Group Value Erosion: | Over $150.00 billion |
Oyster Bay Fund alleges that Nomura breached a repayment plan by selling Adani shares that had been pledged as collateral, resulting in the $43.00 million loss. The Tokyo-based lender has denied any wrongdoing in the matter.
Nomura's Risk Management Response
Within days of the Hindenburg report's publication, senior Nomura officials in Asia convened an emergency video call with Elara Chief Executive Officer Raj Bhatt. The participants included:
- Ajay Jain, head of equity-product sales
- Corrinne Teo, Asia markets sales co-head
- Charles Myong, Asia markets sales co-head
- Priyanka Khurana, managing director
Khurana wrote in an email: "As discussed on the phone just now, given the huge volatility in the portfolio stocks, Nomura's credit is very uncomfortable with the leverage on the portfolio and would like to withdraw the same."
Trading Structure and Exposure
Nomura had facilitated the Elara fund's "significant exposure" to Adani companies through total return swaps. These financial instruments allow investors to wager on shares without direct ownership while using borrowed money to amplify potential gains. Banks arranging such transactions typically demand collateral that can be seized and sold if stock values decline and loans become threatened.
Regulatory and Market Impact
The Hindenburg report had far-reaching consequences beyond this specific lawsuit. The Securities and Exchange Board of India (SEBI) launched investigations into potential disclosure norm violations, requesting explanations from Elara funds. In September, SEBI concluded that evidence relating to Adani's alleged third-party transactions was insufficient to support fraud claims.
Hindenburg's report alleged that two of Elara's investment funds had invested almost exclusively in Adani shares, with one fund pumping approximately $3.00 billion into the stocks representing nearly 99% of its market value.
Current Status
Nomura has stated it "disagrees with Oyster Bay Fund's claim" and will "vigorously defend it." Elara CEO Raj Bhatt has not responded to requests for comment regarding the lawsuit. The case represents part of the ongoing fallout from the Hindenburg report, which Adani Group rejected as "baseless" and "nothing short of a calculated securities fraud."
This lawsuit adds to Nomura's challenges with high-risk trading clients, coming two years after the bank lost almost $3.00 billion on similar trades with Archegos Capital Management.
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