Introduction to the Allegations
On August 10, Hindenburg Research, a U.S.-based firm made serious allegations against the Chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Buch and her husband. The firm claimed that they had hidden financial interests in offshore funds that are connected to the Adani money siphoning scandal.
Earlier in the day, Hindenburg released a mystery statement by hinting at a significant revelation related to India. By the end of the day, they published a detailed report alleging that Adani's apparent confidence in operating without facing strict regulatory actions could be attributed to his relationship with Madhabi Buch who is the SEBI Chairperson.
Hidden Stakes in Offshore Entities
Hindenburg revealed that Madhabi Buch and her husband, Dhaval Buch had allegedly held concealed stakes in the same offshore entities located in Bermuda and Mauritius. These funds according to the report were part of a complex structure used by Vinod Adani, a key figure in the Adani Group.
Whistleblower's Role and Evidence
The report by Hindenburg Research was based on documents provided by a whistleblower and further investigations by other parties. The firm shared a link to the full report on its 'X' account, formerly known as Twitter, underlining the significance of the new revelations. Their tweet highlighted that the SEBI Chairperson's involvement in these obscure offshore entities had been exposed by whistleblower documents.
Hindenburg's report has brought to light serious allegations involving the SEBI Chairperson and her husband by suggesting their involvement in offshore funds tied to the Adani scandal. These claims are supported by documents and investigations, raising concerns about potential conflicts of interest at the highest levels of financial regulation in India.
Introduction to the Financial Case Involving Madhabi Buch and Dhaval Buch
According to whistleblower documents, Madhabi Buch and her husband, Dhaval Buch, seem to have first opened an account with the IPE Plus Fund 1 in Singapore on June 5, 2015. A declaration of funds, signed by a principal at IIFL had revealed that the source of their investment was attributed to "salary," with the couple's net worth being approximately USD 10 million.
The Hindenburg Report and Its Impact on the Adani Group
In January 2023, Hindenburg Research released a report that accused the Adani Group of engaging in financial irregularities. This report led to a considerable decline in the company's stock prices. Despite the Adani Group's efforts to dismiss these claims, the report specifically pointed to allegations of stock manipulation and fraud within the conglomerate. The accusations included inflating share prices, which, once made public, resulted in a significant loss in the value of Adani Group's stocks, reportedly amounting to over USD 100 billion.
The Consequences of the Report and Adani Group's Response
Hindenburg's report was strategically released just two days before Adani Enterprises was set to issue a follow-up public offering valued at USD 2.5 billion. The Adani Group has consistently denied all accusations made in the Hindenburg Research report by standing firm in its stance against the allegations.
Caution for Investors
The Securities and Exchange Board of India (Sebi) advised investors to be careful and perform thorough research before reacting to reports, particularly those from sources like the American short-seller Hindenburg Research. Sebi emphasized the importance of understanding the disclaimer in Hindenburg's reports, which acknowledges that the firm might hold short positions in the securities it evaluates. This suggests that the company could potentially benefit if the value of these securities declines.
Progress in Adani Group Investigation
SEBI provided an update on its ongoing investigation into the Adani group. It highlighted that out of the 24 investigations initiated, 23 have already been completed. The remaining investigation is almost finished. Sebi referenced the Supreme Court's order from January 3, 2024, which noted the completion of most of these investigations with one more concluding in March 2024.
Defence of Sebi's Chairperson
Sebi also defended its chairperson, Madhabi Puri Buch, emphasizing the organization's strong internal controls to manage conflicts of interest. It reassured that there are sufficient mechanisms in place by including a disclosure framework and protocols for recusal, to address any potential conflicts. Sebi confirmed that the chairperson has consistently disclosed her holdings and transactions as required and has recused herself from matters where conflicts of interest could arise.
Show-Cause Notice to Hindenburg Research
Regarding the show-cause notice issued to Hindenburg Research, Sebi mentioned that the process is ongoing. The regulator assured that the matter is being handled according to established procedures and with adherence to the principles of natural justice.
Overview of Wealth and Investments
In a recent statement, Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (Sebi) along with her husband Dhaval Buch provided more information about their wealth, consultancy businesses, associations and investments, particularly in response to allegations mentioned by Hindenburg Research. The couple explained that their financial resources were accumulated over the years through their earnings from salaries, bonuses, and stock options throughout their long-standing careers. Madhabi Puri Buch has worked in the financial services industry for over 20 years, while her husband spent more than 35 years with Hindustan Unilever and its parent company, Unilever.
Response to Allegations of Favouritism
The Buchs addressed accusations suggesting that some of the regulatory matters related to the Real Estate Investment Trust (REIT) industry were biased in favour of specific parties. They strongly denied these claims, calling them "malicious and motivated." Specifically, they responded to allegations of favouritism towards Blackstone, a firm where Dhaval Buch serves as an advisor. They clarified that the regulatory decisions regarding REITs were not made by Madhabi Puri Buch alone, but were approved by the Sebi board after a thorough consultation process.
Clarification on Dhaval Buch's Role and Investments
The couple also clarified that Dhaval has never been involved with Blackstone's real estate division. His role at Blackstone Private Equity began before Madhabi Puri Buch took on the role of Sebi chairperson. They further explained that their investments in the funds mentioned by Hindenburg Research were made in their capacity as private citizens, nearly two years before Madhabi Puri Buch's appointment at Sebi. They emphasized that at no point did these funds invest in any bonds, equities, or derivatives of Adani Group companies.
Investment Decisions and Consulting Firms
The couple disclosed that their decision to invest in the fund was based on the recommendation of their friend Anil Ahuja, who was the Chief Investment Officer (CIO) and a former employee of Citibank and JP Morgan. They later chose to withdraw their investments when Ahuja left his position as CIO of the fund.
Madhabi Puri Buch also clarified that two consulting firms she established while living in Singapore have been inactive since her appointment at Sebi. These firms were disclosed to the market regulator, tax authorities, and Singapore authorities, particularly when there was a change in shareholding to Dhaval Buch.
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