Hindenburg Claims SEBI Chief Admits: Foreign Funds Clear, Adani’s Brother Inflated Shares

American short-seller Hindenburg has stated that in response to their report, SEBI Chairperson Madhabi Buch has admitted to several issues, raising many new questions.

Hindenburg said, “Buch’s response confirms that her investment was in Bermuda/Mauritius funds. This is the same fund used by Gautam Adani’s brother Vinod Adani, who allegedly used these funds to inflate the value of his group’s shares.”

Hindenburg Research also mentioned that the market regulator SEBI was assigned the task of investigating the same offshore funds related to the Adani case, in which Madhabi Puri Buch was involved. This clearly represents a major case of conflict of interest.

In its report released on Saturday, Hindenburg claimed that Madhabi Puri Buch and her husband Dhaval Buch hold shares in an offshore company connected to the Adani Group.

Part 1: New Questions After SEBI Chairperson’s Response

According to Buch, she had left both consulting firms (one Indian and one Singaporean) upon her appointment to SEBI in 2017. However, shareholding data until March 2024 shows that Madhabi holds a 99% stake in Agora Advisory (India). Buch was a 100% shareholder of Agora Partners Singapore until March 16, 2022, and remained its owner during her tenure as a SEBI member. Two weeks after her appointment as SEBI Chairperson, she transferred her shares to her husband.

The Singapore consulting unit Buch established does not publicly disclose its financial reports, making it impossible to determine how much money the unit earned during her tenure at SEBI. Financial statements show that Agora Advisory India, in which Madhabi holds a 99% stake, earned Rs. 2.39 crore during the fiscal years 2022, 2023, and 2024. This income was generated during Madhabi’s tenure as Chairperson.

Buch used her personal email to conduct business in her husband’s name while serving as a SEBI member. The question arises as to what investments and businesses were conducted under her husband’s name while she was in the SEBI Chairperson position.

Part 2: Clarification from SEBI Chairperson and Her Husband After Hindenburg’s Allegations

Dhaval lived in London and Singapore between 2010 and 2019 while working at Unilever. Madhabi worked in private equity funds in Singapore between 2011 and 2017 before becoming an independent advisor. The investment Hindenburg refers to was made by the couple in 2015.

Madhabi joined SEBI in 2017. Dhaval made this investment based on advice from his childhood friend Anil Ahuja, who was the CIO. Ahuja left the fund in 2018. Up until then, the fund had not invested in any bonds or equity of Adani Group companies.

Dhaval joined Blackstone in 2019, where he was not part of the fund’s real estate wing. At that time, Madhabi had not yet become SEBI Chairperson. When Dhaval acquired a stake in the Singapore-based fund, he informed the government along with SEBI.

Part 3: Hindenburg’s Report Accuses SEBI Chairperson on August 10

There is a fund called Global Dynamic Opportunity Fund (GDOF), managed by Gautam Adani’s brother Vinod Adani, which was used to boost the Adani Group’s share prices. GDOF invested its money in another fund, IPE Plus Fund 1.

IPE Plus Fund 1 also traded in Adani shares. It is alleged that SEBI Chairperson Madhabi and her husband Dhaval invested in both funds. Hindenburg stated that SEBI has not properly investigated these funds due to Madhabi’s investment in them.

‘IPE Plus Fund’ is located in Mauritius, founded by Adani Director through India Infoline (IIFL). The company is now known as 360 One. IIFL was also accused during the Wirecard fraud. Wirecard is a German company.

Buch was a 100% shareholder of Agora Partners Singapore until March 16, 2022, and remained its owner during her tenure at SEBI. Two weeks after her appointment as SEBI Chairperson, she transferred her shares to her husband.

In April 2019, India’s first REIT ‘Embassy,’ sponsored by Blackstone, was launched. Dhaval Buch joined Blackstone as a senior advisor without prior experience in the field three months later. At that time, Madhabi Buch was a SEBI member.

During Dhaval’s tenure as an advisor at Blackstone, SEBI made significant changes to REIT regulations. Blackstone is the world’s largest real estate company. Questions are being raised as to whether Madhabi helped the company in which her husband was a consultant.

Hindenburg Accuses SEBI of Protecting Wrongdoers

Hindenburg said, “In our view, SEBI has neglected its responsibility and seems to be making more efforts to protect wrongdoers rather than safeguarding investors from fraud.”

Hindenburg added, “Our understanding from discussions with sources in the Indian market is that support for Adani from the Securities Exchange Board of India began almost immediately after the publication of our January 2023 report.”

“We were informed that SEBI pressured brokers to close short positions in Adani shares following our report, creating buying pressure and assisting Adani Group shares at a critical time.”

Hindenburg Research stated in its blog that “while pressure was applied to the public and the Supreme Court to investigate this matter, SEBI appeared to be faltering. Initially, it seemed to agree with many key findings of our report.”

Citing the Supreme Court case records, the research firm said, “SEBI was unable to satisfy that the FPIs’ funds were not linked to Adani. Later, SEBI claimed to be unable to conduct further investigation.”

Adani Group has stated that they have no business relationships with those named by Hindenburg. The group also claimed no dealings with people mentioned in relation to SEBI. The questions raised about foreign holdings are baseless. The group’s foreign holding structure is completely transparent and has not been used for misuse of funds.

The group said, “Hindenburg has misused publicly available information for its benefit. The allegations against Adani Group have already been proven baseless. After a thorough investigation, the Supreme Court dismissed Hindenburg’s allegations in January 2024.”

Adani Group Faces Allegations of Money Laundering and Share Manipulation

On January 24, 2023, Hindenburg Research published a report related to the Adani Group. Following the report, the group’s share prices saw a significant drop. However, there was a recovery afterward. In relation to this report, Indian market regulator Securities Exchange Board of India (SEBI) also issued a 46-page show cause notice to Hindenburg.

In a blog post published on July 1, 2024, Hindenburg Research stated that the notice indicates it has violated regulations. SEBI alleged that Hindenburg’s report contained false statements intended to mislead readers, the company stated. In response, Hindenburg made several allegations against SEBI.

Adani Enterprises’ Share Price Dropped 59% After Report

On January 24, 2023 (January 25 Indian time), the share price of Adani Group’s flagship company Adani Enterprises was Rs. 3442. On January 25, it closed at Rs. 3388, a decrease of 1.54%. By January 27, the share price had dropped by 18% to Rs. 2761. By February 22, it had decreased by 59% to Rs. 1404. However, there was a subsequent recovery in the share price. On Friday, Adani Enterprises’ share closed at Rs. 3,186, an increase of 0.60%.

Short Selling Explained

Short selling involves selling shares that the trader does not own at the time of the transaction. These shares are later purchased to cover the position. Prior to short selling, arrangements must be made to borrow or lend the shares.

In simple terms, while in traditional selling you buy shares first and then sell them, in short selling, shares are sold first and then bought. The difference between the selling price and buying price represents your profit or loss.