New Delhi: In explosive new revelations, US-based short seller Hindenburg Research – whose report on the Adani group last year alleged price rigging of company shares – has accused Securities and Exchange Bureau of India (SEBI) chief Madhabi Buch and her husband of having held “stakes in both the obscure offshore funds used in the Adani money siphoning scandal,” citing “whistleblower documents”.
The Hindenburg Report in 2023 triggered a series of investigations into alleged irregularities by the Adani group, but was marked by little or no visible regulatory action in India. In its latest release, Hindenburg makes other serious allegations about SEBI chairperson Buch and husband Dhaval Buch potentially personally benefitting from certain statements made by her in her capacity as chairperson of India’s stock market regulator. It also says that she may have not disclosed the total income she receives from ‘consulting’ via her ownership of Agora Consulting and the discrepancy could be as much as “4.4 times” her salary as SEBI chief.
Hindenburg alleges that “despite the existence of thousands of mainstream, reputable onshore Indian mutual fund products, an industry she now is responsible for regulating, documents in its possession show Madhabi Buch and her husband “had stakes in a multi-layered offshore fund structure with minuscule assets, traversing known high-risk jurisdictions, overseen by a company with reported ties to the Wirecard scandal, in the same entity run by an Adani director and significantly used by Vinod Adani in the alleged Adani cash siphoning scandal.”
As per the documents cited by Hindenburg, “Madhabi Buch and her husband Dhaval Buch first appear to have opened their account with IPE Plus Fund 1 on June 5, 2015 in Singapore.” These offshore Bermuda and Mauritius funds, says Hindenburg, were “found in the same complex nested structure, used by Vinod Adani”. Two weeks prior to her appointment as SEBI chief, says the report, “Madhabi’s husband, Dhaval Buch, wrote to Mauritius fund administrator Trident Trust, according to documents we received from a whistleblower. The email was regarding his and his wife’s investment in the Global Dynamic Opportunities Fund (“GDOF”).” In his communication, Dhaval Buch requested to “be the sole person authorised to operate the Accounts.”
The Supreme Court Expert Committee Report of May 6, 2023 had said that SEBI had “drawn a blank” in its investigations into who funded Adani’s offshore shareholders. Hindenburg says it finds it “unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson.”
The Adani Group has denied all allegations levelled by the short-seller, though the role of Gautam Adani – seen to be personally close to Narendra Modi since his days as the chief minister of Gujarat and the BJP – became a political hot potato and was a major election issue.
In its January 2023 report, Hindenburg claimed it had identified, among other funds, “two Mauritius entities called EM Resurgent Fund and Emerging India Focus Funds. Both entities were disclosed as related parties of India Infoline (now called 360 One) and overseen by its employees, per its annual reports.[5] [Pg. 34]” The allegation according to “the trading patterns [of these funds]” was that “that the stock parking entities and the suspicious offshore entities may have artificially inflated the volume and/or price of some Adani listed companies.”
Hindenburg says its findings were buttressed by an August 2023 investigation by the Financial Times, which found a “secret paper trail” at EM Resurgent and Emerging India Focus Funds. This raised questions on whether Adani had used business associates as “front men” to “bypass rules for Indian companies that prevent share price manipulation.”
SEBI has yet to take any action against these funds. On June 27, 2024, SEBI sent Hindenburg a ‘show cause’ notice. SEBI said the disclosure around Hindenburg’s short position “was deficient.” It termed Hindenburg as “reckless” for quoting a broker who had been banned for saying how SEBI was “fully aware that firms like Adani used complex offshore entities to flout rules, and that the regulator participated in the schemes.”
From April 2017 to March 2022, Hindenburg alleges, “when Madhabi Buch was a whole time member and chairperson at SEBI, she had a 100% interest in an offshore Singaporean consulting firm, called Agora Partners” and on March 16, 2022, “two weeks after her appointment as SEBI chairperson, she quietly transferred the shares to her husband”.
Hindenburg also goes on to allege that Madhabi Buch currently has a 99% stake in an Indian consulting business called Agora Advisory, where her husband is a director and that in 2022, this company reported revenue of $ 261,000 from consulting, which it says is “4.4 times her disclosed salary at SEBI”.
Dhaval Buch and Blackstone
Dhaval Buch being appointed as Advisor, Blackstone during Madhabi Buch’s tenure as whole time member of SEBI has been questioned by Hindenburg, alleging that her publicly saying she supports REITS – “a naescent asset class” – resulted in significant benefits for Blackstone. Blackstone sponsored Mindspace and Nexus Select Trust, India’s second and fourth REIT respectively, to receive SEBI approval to raise money, going for an initial public offering or an IPO.
Hindenburg says there is a question whether this can be characterised as a “conflict” of interest or capture. But it says, “either way, we do not think SEBI can be trusted as an objective arbiter in the Adani matter. We think our findings raise questions that merit further investigation. We welcome additional transparency.”
The Wire has sent a questionnaire to Madhabi Buch on Hindenburg’s latest allegations. This story will be updated when she responds.
Responding to the Hindenburg Report, the Adani Group said they “completely reject these allegations” calling it “baseless”.
“It is reiterated that our overseas holding structure is fully transparent, with all relevant details disclosed regularly in numerous public documents. Furthermore, Anil Ahuja was a nominee director of 3i investment fund in Adani Power (2007-2008) and, later, a director of Adani Enterprises until 2017,” the spokesperson of the Adani Group said in a statement.
“The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing. We remain steadfastly committed to transparency and compliance with all legal and regulatory requirements,” the spokesperson added.
Here’s the full statement:
