Fresh Allegations in Adani-Hindenburg Saga: SEBI Chief Faces Conflict of Interest Accusations*

 

By Palak Srivastava

Fresh Allegations in Adani-Hindenburg Saga: SEBI Chief Faces Conflict of Interest Accusations

The war of words between Hindenburg Research and India's Adani Group has reached its newest phase: fresh allegations from the US-based short-seller against the head of India's market regulator. Hindenburg Research targeted Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India, over the weekend for what it said was a conflict of interest connected with the Adani investigation.

The SEBI has been investigating the Adani Group ever since the Hindenburg explosive report in January last year. This was the report that triggered a massive selloff of Adani's stocks, wiping out over $150 billion in market value despite the strong refutations by the group of any wrongdoing. The stocks of Adani have partly recovered, but the controversy hangover over them has not completely gone.

For the last few weeks, it has been the state of India's stock market that dominated social media discussions—not so much because of investor interest, but more on account of the increased scrutiny being placed upon its regulator, the SEBI. The newest development started when Hindenburg presaged "something big" on social media and issued a report that implicated Buch in some questionable dealings with offshore funds that he said were close associates of the Adani Group. Buch and the Adani Group have denounced those allegations.

The Adani Group controversy broke out after an initial report by Hindenburg charged the multigroup conglomerate founded by billionaire Gautam Adani with stock manipulation and accounting fraud running into multi-decadal periods. Adani Group is engaged in business segments varying from commodities trading to airports, utilities, ports, renewable energy, and others and has consistently denied these allegations. That said, the market value for the company did plunge drastically immediately after the report before rebounding to a degree.

The new revelations that Hindenburg has come out with relate to the alleged close connections between Buch and offshore funds linked to the Adani Group of Companies, and it is contended that her involvement may have compromised the probe ordered by SEBI. But Buch has denied a conflict of interest and has claimed that she had invested in those funds before joining SEBI. Until now, there has been no evidence that directly links her investment to the Adani Group or any influence on SEBI's probe underway.

The Adani Group lost $2.43 billion immediately on Monday after the release of the latest report from Hindenburg but recovered part of the losses by the close of trade.

It referred to previous probes by the Financial Times and the Organised Crime and Corruption Reporting Project, which associated offshore funds based in Bermuda and Mauritius with Adani's business partners. Hindenburg now accuses Buch and her husband, Dhaval Buch, of investing in those very funds as far back as 2015. Shortly before Buch was appointed to SEBI in 2017, her husband reportedly asked for control over the accounts associated with these very funds.

It also accused Buch of managing investments from her personal email, questioning her neutrality in the investigation against Adani. The company further pointed out Buch's husband's later role as advisor to the U.S. investment firm Blackrock, indicating that regulatory changes effected during Buch's time at SEBI benefited companies like Blackrock.

Buch and her husband said their investments were made when they were private citizens in Singapore, long before she joined SEBI. They said that the exposure had to do with a childhood friend and not the Adani Group or any Adani-related entities. They also drew attention to the strict disclosure and recusal norms of SEBI, which have been followed assiduously.

The statement of Buchs condemned the Hindenburg report as an attack on SEBI's credibility and character assassination. It said that such allegations made in the report were totally baseless and at attacking the integrity of India's market regulator.

By

Palak Srivastava