Hindenburg Research Unleashes New Allegations, Targeting SEBI Chairperson
Updated: Highlights Ms Madhabi Buch and her husband's significant interests in overseas entities, including those linked to the Adani Group.
Hindenburg Research Levels New Allegations
A cryptic tweet from the US-based short-seller “Hindenburg Research”, which previously exposed alleged malpractices by the Adani Group, sent shivers through the Indian financial market watchers yesterday. The tweet, "Something big soon India," posted while the markets were closed, hinted at the release of a significant report, which has now emerged with serious personal allegations involving SEBI Chairperson Madhabi Buch and her husband.
The report suggests potential conflicts of interest related to their alleged investments in offshore entities linked to the Adani Group. While some may dismiss these claims as part of a broader anti-India agenda, the detailed specifics call for careful consideration rather than summary dismissal. Although we do not endorse Hindenburg Research or are in a position to verify the veracity of their claims, ignoring these allegations could prove detrimental. We present a summary of the report's contents to our esteemed readers, encouraging them to form their own informed opinions on the matter and its potential implications for the government. A serious reader may read the full report by following this link.
Following the statement of the Buch couple, after the Hindenburg report went public, we have also updated this piece by adding their clarification verbatim and giving our take on the same, along with our analysis, at the end.
Overview of Hindenburg Research Report on Adani Group
Hindenburg Research’s new report alleges flagrant conflicts of interest involving the Chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Buch, and her connection to offshore entities linked to the Adani Group. The report follows up on Hindenburg's previous exposé, which accused the Adani Group of running the "largest con in corporate history" through an elaborate web of offshore shell entities, primarily based in Mauritius, to manipulate stock prices and engage in undisclosed related party transactions.
SEBI's Inaction Following Initial Allegations
Despite substantial evidence and numerous independent investigations corroborating the claims against the Adani Group, SEBI has not taken any effective public action against the conglomerate. Instead, SEBI issued a 'show cause' notice to Hindenburg Research, accusing the firm of deficient disclosure related to its short position on Adani stocks, while not addressing any factual inaccuracies in the original report.
Alleged Conflicts of Interest Involving SEBI Chairperson
Hindenburg Research's latest report presents whistleblower documents that reveal Madhabi Buch, along with her husband Dhaval Buch, had stakes in offshore funds associated with the Adani Group. These stakes were held in obscure offshore funds, including the IPE Plus Fund, which is linked to the Adani money siphoning scandal. The report suggests that SEBI's reluctance to pursue action against Adani may stem from these conflicts of interest, raising concerns about the integrity of the regulatory body.
Detailed Structure of the Offshore Entities
The report provides an in-depth analysis of the offshore fund structure, which includes entities like the IPE Plus Fund in Mauritius, managed by India Infoline (IIFL). These funds were allegedly used by Vinod Adani, the brother of Gautam Adani, to siphon money through over-invoicing of power equipment. The report also highlights the complex, multi-layered fund structures used to conceal these activities, and the involvement of key Adani Group associates in managing these funds.
SEBI Chairperson's Involvement in the Funds
According to the whistleblower documents, Madhabi Buch and her husband opened an account with the IPE Plus Fund in 2015. The documents indicate that in March 2017, just before Madhabi Buch's appointment as a Whole Time Member of SEBI, her husband requested to be the sole operator of their account, effectively transferring control out of her name. These actions raise questions about potential conflicts of interest, especially given her subsequent role in regulating the very industry connected to these offshore entities.
SEBI's Response to Supreme Court Investigation
The report also touches on SEBI's failure to identify the ultimate owners of Adani's offshore shareholders, as highlighted in the report of the Expert Committee appointed by India’s Supreme Court. The committee set up under the orders of the apex court noted that SEBI had "drawn a blank" in its investigation, which Hindenburg Research suggests may be due to the Chairperson's own involvement with similar offshore funds.
Additional Conflicts Involving SEBI Chairperson's Private Interests
The report further reveals that during her tenure at SEBI, Madhabi Buch held a 99% interest in an offshore Singaporean consulting firm, Agora Partners, which she transferred to her husband shortly after her appointment as SEBI Chairperson. Unlike the opaque nature of the Singaporean entity, more transparency is available regarding the Indian counterpart. At the end of the financial year 2022, Agora Advisory—99% owned by Madhabi Buch—generated INR 19.8 million (approximately $261,000) in revenue from consulting, as per its annual report. This amount was 4.4 times Buch’s previously disclosed salary as a Whole-Time Member at SEBI.
Furthermore, her husband, Dhaval Buch, was appointed as a Senior Advisor to Blackstone, a major investor in India, during her SEBI tenure. This connection is particularly significant as SEBI approved several regulations during this period that were beneficial to Blackstone's real estate interests.
SEBI Chairperson's Role in Promoting REITs and Blackstone's Indian Operations
The Hindenburg report further delves into SEBI Chairperson Madhabi Buch's active role in promoting Real Estate Investment Trusts (REITs) in India, a nascent asset class that has seen significant regulatory support during her tenure. Blackstone, one of the largest global private equity firms and a major player in India's REIT market, has been closely involved in this sector. Notably, Blackstone has been attempting to acquire a prime property from the Adani Group in Mumbai, in a deal reportedly valued between ₹18 billion and ₹20 billion (approximately $215 million to $240 million). The report also highlights the appointment of Dhaval Buch, the husband of the SEBI Chairperson, to a senior advisory position within Blackstone's Indian operations in 2019, despite his lack of prior experience in capital markets or real estate. These connections raise further questions about potential conflicts of interest and the impartiality of SEBI in overseeing such significant transactions.
In Summary: Questions About SEBI's Objectivity
Hindenburg Research concludes that the revelations raise serious concerns about SEBI's ability to act as an impartial regulator in the Adani case. The report calls for further investigation into the Chairperson's connections and the potential influence these relationships may have had on SEBI's regulatory actions.
This condensed article merely highlights the key points and allegations raised by Hindenburg Research, without endorsing any specific viewpoint, and underscores the need for transparency and further investigation in light of these serious accusations. We leave our esteemed and enlightened readers to draw their own conclusions.
सत्यमेव जयते
Jai Hind!
The SEBI Chief and Husband’s Response
After the widespread coverage of the Hindenburg Report in the social media as well as in the mainstream media, the couple in the eye of the serious allegations issued the following response.
Statement from SEBI Chief Madhabi Puri Buch and her husband.
“In the context of allegations made in the Hindenburg Report dated August 10,2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report.
The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.
Further, in the interest of complete transparency, we would be issuing a detailed statement in due course.
It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same.”
Madhabi Puri Buch
Dhaval Buch
Our Take (updated)
This is bland denial will not cut much ice with the Indian public as well as elsewhere, in absence of point-by-point denial or clarification or rebuttal. In any case, it is better than having kept as mum.
The Buch’s state that they “would be issuing a detailed statement in due course”. However no timeframe has been given.
The following sentence in their statement has been very carefully and cleverly drafted (emphasis ours):
“We have no hesitation in disclosing any and all financial documents, including those that relate to to the period when we were strictly private citizens, to any and every authority that may seek them.”
In other words:
They would be be disclosing anything suo moto.
They would not be making these statements available to the general public.
They would only be making their private or personal financial information available to any and every authority that may seek them. Thus if any of the authorities, including the Ministry of Finance, or the CBDT or the CBI or the ED, do NOT ask for this information, or requisitions only partial or sketchy information, the couple under the shadow of these serious allegations will keep mum.
Final Word
Caesar’s wife must be above suspicion. The position of Ms Buch as the SEBI Chairperson is now clearly untenable. The allegations made by Hindenburg are very specific and vanilla statements of denial will not absolve her. She would be well advised to submit her resignation with immediate effect, rather than prolonging her misery and exacerbating the consequences that cannot but visit upon her, sooner than later. That would also avoid considerable embarrassment to the Government. Any decision that she takes, while clinging on to her exalted office, especially in respect to the Adani Group or the Hindenburg, would be utterly lacking in credibility.
Earlier, the Supreme Court of India took SEBI’s submissions as gospel truth in spite of some very sharp observations of the Expert Committee appointed by it. If Ms Buch hangs on, the Supreme Court should take up the matter suo moto, rather than waiting for a PIL to be filed. The apex court must take on the onerous duty of cleaning the Augean stables— the Indian public both expects it and deserves it.
Well critiqued !