It’s been around 18 months since the reports of Adani allegations by Hindenburg Research resulted in a fall in Adani Group stocks. Ever since the Adani Group has denied the claims and the SEBI has been investigating these allegations. Now, there is another report from Hindenburg. On 10th August 2024, Hindenburg came out with a report regarding the SEBI’s chairperson stake in Adani companies through offshore funds.

This report was after SEBI showed cause notice for Hindenburg. They rebutted the SEBI’s notice with KMIL, which was involved in their transaction for short selling on the stock using the name Kingdom Capital. Now, the Adani issue is further spread across those who are involved in the regulatory investigation.

The following are the allegations from Hindenburg which has accused SEBI Chairperson Madhabi Puri Buch and her husband Dhaval Buch of having a connection with Adani.

Allegations from Hindenburg on SEBI Chairperson

“IPE Plus Fund”, an offshore fund set up by an Adani Director

The allegation was Adani on overvaluing the import of power equipment which was used to launder money through shell companies. Vinod Adani (elder brother of Gautam Adani) had invested in the “Global Dynamic Opportunities Fund” (GDOF) in Bermuda. The GDOF then invested in IPE Plus Fund 1, from which it would invest in India and traded equity shares and other financial instruments. 

These funds were managed by IIFL (India Infoline), now 360 One. They said IIFL was also alleged to have committed fraud using Mauritius funds in the Wirecard takeover deal. The allegation was Amit Shah co-founder of IIFL Wealth had entered into the deal by arranging an investment fund to buy Hermes at €36mn and then sold it to Wirecard weeks later at €326mn in 2015.

There were close ties between Adani and the founder and Chief Investment Officer of the IPE Plus Fund Anil Ahuja. They alleged on Ahuja that he was a director of Adani Enterprises serving three terms in nine years ending June 2017, before this stint he was a director of Adani Power.

Whistleblower documents on Madhabi Buch and her husband 

SEBI chairperson and her husband had hidden stakes from offshore accounts residing in Bermuda and Mauritius. They opened an account with IPE Plus Fund 1 on June 5th, 2015, in Singapore with the source of investment mentioned as “Salary”. The net worth of the couple is estimated at $10 million. 

Madhabi was appointed as SEBI chairperson in 2017. Her husband requested to change the authorization of the account under his name to Trident Trust. It is a Mauritius-based fund before Madhabi’s SEBI appointment. 

Then further allegations related to the account controlled by Madhabi during her tenure by writing a letter from Gmail to redeem the fund units in 2018. 

SEBI clean chit on investigations and allegations on SEBI Chairperson involvement 

In response to the investigations on the Adani matters, SEBI has hit a wall in finding offshore fund holders. By further blaming SEBI’s unwillingness to take action on those shareholders they alleged Madhabi’s complicity in using the funds by Vinod Adani.

No Action from SEBI on Adani Shareholders operated by India Infoline 

As per Hindenburg’s report, they identified two Mauritius entities namely Emerging India Focus Funds and EM Resurgent Fund were both disclosed as related parties of 360 One (India Infoline). They further alleged the stock manipulation of Adani stocks and blamed SEBI for no action on these.

SEBI Chairman’s interest in an offshore fund called Agora Partners and transfer of shares

In 2013, Under “Business and Management Consultancy”, Agora Partners Pte Limited was registered in Singapore. It was disclosed that Madhabi had a 100% stake as a shareholder according to the 2014 annual report. In 2017, when she joined SEBI, Madhabi was still a shareholder in that entity. She transferred her stake in Agora to her husband. 

This Singapore entity is exempted from disclosure and further details are not available to whom the consultancy services are provided to understand the chairperson’s business interests.

During Madhabi’s tenure, her husband was appointed as Advisor to Blackstone 

The report alleged, that Dhaval Buch described his experience in procurement and all aspects of the supply chain. As per LinkedIn, he spent most of his tenure in Unilever, then he rose to chief procurement officer. With no experience in capital markets or real estate, he joined Blackstone, a global private equity firm as Senior Advisor in July 2019.

Mindspace and Nexus Select Trust REITs were approved by SEBI during Dhaval and Madhabi’s term

During Madhabi’s tenure, the REITs sponsored Mindspace and Nexus Select Trust was approved by SEBI and went to IPO in 2019 just 3 months before Dhaval joined Blackstone in 2019. 13 Months later, in August 2020, Mindspace was SEBI approved for IPO. Now Nexus Trust is described as India’s largest platform and has become the fourth publicly traded REIT.  

Regulation changes for REITs to benefit private equity firms

Since the chairperson’s appointment, SEBI proposed and implemented changes in REIT legislation. It includes 7 consultation papers, 3 consolidated updates to the “Master Circular” and an amendment, a New regulatory framework for “MSME” REITs.

Further, with an offer for sale of REITs, new boards can be nominated through unitholders which includes Blackstone for director nomination. Blackstone sold its stake in Embassy REIT valued at around $853 million which is touted as India’s largest block trade in that year. 

SEBI Chairman comments on REITs as a product 

In the report, it is alleged that the SEBI chairperson has promoted REITs as one of her “favourite products for the future” in News 18 Rising Bharat Summit.

Even at the SEBI-NISM research conference, she shared a positive view of REITs. At the CII Corporate Governance summit, she predicted growth in REITs as it would be as large as India’s GDP with municipal bonds and InvITs (infrastructure investment trusts).

Madhabi’s stake in the Indian Consulting Business with Revenue higher than her SEBI salary

As per the certificate of incorporation, Agora Advisory Private Limited on May 7th, 2013 disclosed their business activity under consultancy.

She has a 99% stake in the business with her husband Dhaval Buch as a director. Unlike the Singapore entity, the Indian entity has more visibility. At the end of FY22, the advisory generated Rs. 19.8 million from consultancy as per its annual report. This revenue is 4.4 times Madhabi’s previously disclosed salary as a whole-time member of SEBI.

Conclusion

We all looked into these allegations from Hindenburg on the SEBI Chairman, her husband, and connections with the Adani Group. This allegation from Hindenburg’s conclusion is more related to Conflict of Interest. Madhabi and her husband have stated as baseless and committed to disclose the documents before her tenure. 

Now, the short seller is investigating others who are in the process of investigations into Adani companies. Further developments may arise based on these allegations and further details need to be looked at. What do you think about these allegations from Hindenburg on the SEBI Chairperson? What are your thoughts on the disclosures? Let us know your views in the comments section below.

Written by Santhosh 

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks, also get updated with stock market news, and make well-informed investments.