A day after Securities and Exchange Board of India (SEBI) Chairperson Madhabi Puri Buch called out the Hindenburg Research's allegation against her as an attempt of “character assassination”, the US short-seller on Sunday night said the marker regulatory chief's response to its report includes "several important admissions" and "raises numerous new critical questions". SEBI is the regulatory authority responsible for overseeing the securities market in India.
Citing a massive "conflict of interest" in the SEBI investigation into the Adani matter, Hindenburg Research, in a series of posts on X, raised questions on investments or business Buch engaged in-- through her husband Dhaval's name-- while serving in an official capacity.
This comes soon after Buch and her husband--in their second statement on Sunday-- detailed their investments through offshore investment vehicles and said that Hindenburg was served a show cause notice for violations of various laws in India.
Hindenburg Research's Statement
In its reply, Hindenburg claimed Buch’s response to its report now "publicly confirms her investment in an obscure Bermuda/Mauritius fund structure, alongside money allegedly siphoned by Vinod Adani. She also confirmed the fund was run by a childhood friend of her husband, who at the time was an Adani director."
Citing a massive "conflict of interest" in the market regulator's investigation into the Adani matter, Hindenburg Research said, “SEBI was tasked with investigating investment funds relating to the Adani matter, which would include funds Buch was personally invested in and funds by the same sponsor which were specifically highlighted in our original report.”
Hindenburg Research pointed out that Buch’s statement also claims that the two consulting companies she set up, including the Indian entity and the opaque Singaporean entity “became immediately dormant on her appointment with SEBI” in 2017, with her husband taking over starting in 2019.
"Per its latest shareholding list as of March 31st, 2024, Agora Advisory Limited (India), is still 99 per cent owned by Madhabi Buch, not her husband. This entity is currently active and generating consulting revenue. Furthermore, Buch remained a 100 per cent shareholder of Agora Partners Singapore until March 16th, 2022, per Singaporean records, owning it during her entire time as a SEBI Whole Time Member. She only transferred her shares into her husband’s name 2 weeks after her appointment as SEBI Chairperson. The Singaporean consulting entity she set up doesn’t publicly report its financials like revenue or profit so it’s impossible to see how much money this entity has earned during her time at SEBI," the US short-seller said.
Hindenburg also pointed towards an email claimed to be sent by Buch on behalf of her husband on February 25, 2018, and said, "The Indian entity, still 99 per cent owned by the SEBI Chairperson, has generated INR 23.985 million (U.S. ~$312,000) in revenue (i.e. consulting) during the financial years (‘22, ‘23, and ‘24), while she was serving as Chairperson, per its financial statements. "
"In 2017, weeks ahead of her appointment as SEBI Whole Time Member, she ensured the accounts with ties to Adani “be registered solely in the name of Dhaval Buch", her husband, per whistleblower documents. Despite disclaiming control, a private email she sent a year into her SEBI term shows she redeemed stakes in the funds through her husband’s name, per the whistleblower documents," the short seller added.
It further raised the question, “What other investments or business has the Sebi Chairperson engaged in through her husband's name while serving in an official capacity?”
On Buch’s statement, issued on Sunday to rebut the allegations made against her and her husband, Hindenburg pointed out that the SEBI chief said her husband used the consulting entities starting in 2019 to transact with unnamed “prominent clients in the Indian industry”, and asked if these clients includes that ones SEBI is tasked with regulating.
On SEBI chief's statement of “commitment to complete transparency,” the short seller asked if Buch would “publicly release the full list of consulting clients and details of the engagements, both through the offshore Singaporean consulting firm, the Indian consulting firm, and any other entity she or her husband may have an interest in?”
"Finally, will the SEBI Chairperson commit to a full, transparent and public investigation into these issues," it asked further.
SEBI's Statement
SEBI on Sunday said it has completed all but one investigation into allegations against the Adani group as it responded to US short-seller Hindenburg Research's charge of going slow on the probe, potentially because its chairperson was invested in funds at the heart of the probe - an allegation market regulator head said was baseless and attempted character assassination.
The allegations ranging from using offshore investment funds to inflate stock price and non-disclosure of related party interest that Hindenburg first levied in its damning report against the Adani group in January 2023, have been duly investigated by SEBI, the regulator said in a statement.
SEBI said two of the 24 investigations against Adani group were pending when the Supreme Court last passed an order on the issue in January this year. Subsequent to that, one investigation was completed and the one remaining is close to completion. During the probe, it said, more than 100 summons were issued and more than 300 documents containing around 12,000 pages have been examined.
Pursuant to the completion of investigations, SEBI initiates enforcement proceedings which are quasi-judicial in nature involving notices and hearings before orders are passed, which are made public, the regulator said without disclosing the content of its investigation against Adani.
SEBI said as a matter of policy it refrains from commenting on any investigation/ongoing enforcement matter.
SEBI also defended its chairperson. In a two-page statement, it said Buch had made relevant disclosures from time to time and she had also recused herself in matters involving potential conflicts of interest.
Buchs' Statements Rebutting Allegations
Madhabi Puri Buch and her husband Dhaval Buch, in a joint statement, strongly denied the "baseless allegations" and "insinuations" made in the report, saying the charges were devoid of any truth.
The investments were made in 2015, well before her appointment as a whole-time member of SEBI in 2017 and the subsequent elevation as chairperson in March 2022, and in capacity as private citizens living in Singapore, Buchs said. According to the statement, investment in the two funds was made on advice of Dhaval's childhood friend, Anil Ahuja - the person which Hindenburg report identified as the founder and Chief Investment Officer (CIO) of the Mauritius-based IPE Plus Fund.
Adani Group's Statment
Adani group too denied any commercial dealings with the SEBI head, while wealth management entity 360ONE - formerly called as IIFL Wealth Management - separately said Buch and her husband Dhaval Buch's investment in IPE-Plus Fund 1 was less than 1.5 per cent of the total inflows and that it did not make any investments in Adani Group shares.
The Adani group also in its statement said Ahuja was a nominee of 3i Investment Fund in Adani Power (2007-2008) and served as a director of Adani Enterprises for three terms spanning nine years ending in June 2017.
SEBI's Probe and Hindenburg's Allegations
Hindenburg on Saturday alleged that SEBI chairperson Madhabi Puri Buch and her husband had undisclosed investments in obscure offshore funds in Bermuda and Mauritius, the same entities allegedly used by Vinod Adani - the elder brother of group chairman Gautam Adani - to round-trip funds and inflate stock prices.
SEBI in October 2020 began a probe into 13 opaque offshore entities that held between 14 per cent and 20 per cent across five publicly traded stocks of the conglomerate to determine if the foreign investors are genuine public shareholders or acting as fronts for the promoters.
Citing whistleblower documents, Hindenburg stated that the SEBI chairperson and her husband invested in offshore entities that were allegedly part of a fund structure managed by India Infoline and in which Vinod Adani also had investments.
It said the Bermuda-based Global Opportunities Fund, which allegedly was used by entities connected to Adani Group to trade in shares of group companies, had sub-funds. Buch and her husband were investors in one of these sub-funds in 2015.
Hindenburg claimed SEBI has shown a surprising lack of interest in Adani's alleged undisclosed web of Mauritius and offshore shell entities.