In August 2024, Hindenburg Research, an American investment research firm known for its sharp critiques and investigations into corporate malpractices, released a new report focusing on Madhabi Puri Buch, the Chairperson of India’s Securities and Exchange Board (SEBI). This report follows Hindenburg’s explosive findings from 18 months ago, where the firm accused the Adani Group, a massive Indian conglomerate, of engaging in one of the largest corporate frauds in history. The new report connects Madhabi Puri Buch and her husband, Dhaval Buch, to the same offshore funds allegedly used by the Adani Group to launder money and manipulate the stock market.
Background: The Adani Group Controversy
The Adani Group, led by billionaire Gautam Adani, has been under intense scrutiny since Hindenburg’s original report in early 2023. The report accused the conglomerate of operating a vast network of offshore shell entities, primarily based in Mauritius, to facilitate billions of dollars in undisclosed related-party transactions, stock manipulation, and other questionable financial activities. These allegations painted the Adani Group as a major player in corporate malfeasance, with a significant portion of the funds being moved through secretive offshore channels.
Despite the gravity of these accusations and over 40 independent media investigations that corroborated Hindenburg’s findings, SEBI has taken minimal public action against the Adani Group. Instead of pursuing the alleged wrongdoing with the rigor expected of a regulatory body, SEBI has been criticized for its apparent reluctance to address the core issues raised by Hindenburg. This inaction has raised suspicions about potential conflicts of interest within SEBI, particularly concerning its leadership.
Key Allegations Against SEBI Chairperson Madhabi Puri Buch
Hindenburg’s latest report presents a series of serious allegations against Madhabi Puri Buch, suggesting that her personal and financial connections to the Adani Group might explain SEBI’s lack of decisive action. The key allegations can be broken down into several critical points:
1. Involvement in Offshore Funds Linked to Adani
According to whistleblower documents cited by Hindenburg, Madhabi Buch and her husband, Dhaval Buch, had significant investments in offshore funds that were part of the same complex financial structures allegedly used by Vinod Adani, Gautam Adani’s brother, to siphon and launder money. These funds, such as the IPE Plus Fund registered in Mauritius, were intricately linked to the Adani Group’s operations.
The whistleblower documents reveal that the Buchs opened their account with the IPE Plus Fund on June 5, 2015, in Singapore. At the time, Madhabi Buch was not yet part of SEBI, but her connection to these funds became problematic when she was appointed a Whole Time Member of SEBI in April 2017. Just weeks before her appointment, Dhaval Buch requested that the assets be moved solely under his name, possibly to avoid potential conflicts of interest as his wife assumed a regulatory role.
Despite these precautions, Hindenburg’s report points out that Madhabi Buch continued to engage with these offshore funds during her tenure at SEBI. In February 2018, while still serving as a Whole Time Member, she used her private email to correspond with India Infoline (IIFL), the company managing the IPE Plus Fund, to redeem units in the fund under her husband’s name. This connection to offshore funds used by Vinod Adani, combined with her role as a senior SEBI official, raises serious concerns about her impartiality in regulating the Adani Group.
2. Conflict of Interest with Blackstone
Another significant aspect of the report is the potential conflict of interest involving Madhabi Buch’s husband, Dhaval Buch, and his role as a Senior Advisor to Blackstone, a global private equity firm with substantial investments in India. Dhaval Buch, who previously had no experience in real estate, capital markets, or fund management, joined Blackstone in July 2019, during his wife’s tenure at SEBI.
Blackstone has been a major player in the Indian market, particularly in the Real Estate Investment Trusts (REITs) sector. Under Madhabi Buch’s leadership, SEBI introduced several regulatory changes that benefited the REIT market, including new frameworks, consultation papers, and amendments that directly impacted firms like Blackstone. For instance, Blackstone sponsored Mindspace REIT, which became India’s second REIT to go public after receiving SEBI’s approval in August 2020.
Madhabi Buch has publicly promoted REITs as a promising asset class, even referring to them as her “favorite products for the future” during industry conferences. However, she did not disclose her husband’s connection to Blackstone, which stands to gain significantly from these regulatory changes. This lack of transparency has led to questions about whether SEBI’s decisions were influenced by her personal interests, rather than being based on objective regulatory principles.
3. Agora Advisory: A Lucrative Consulting Business
In addition to the offshore investments and potential conflicts of interest with Blackstone, Hindenburg’s report also highlights Madhabi Buch’s ownership of a consulting firm called Agora Advisory Private Limited. Established in India in May 2013, this firm specializes in consultancy services and has generated substantial revenue, far exceeding Madhabi Buch’s disclosed salary at SEBI.
At the end of the financial year 2022, Agora Advisory, which is 99% owned by Madhabi Buch, reported INR 19.8 million (approximately USD 261,000) in revenue from consulting. This figure is 4.4 times her disclosed salary as a Whole Time Member at SEBI, raising further questions about potential conflicts of interest and the sources of the firm’s income.
Moreover, the report mentions that Madhabi Buch previously owned a 100% stake in an offshore Singaporean consulting firm called Agora Partners Pte Ltd, which she quietly transferred to her husband just two weeks after her appointment as SEBI Chairperson in March 2022. This offshore entity is exempt from disclosing financial statements, making it difficult to ascertain the firm’s revenue sources and clients, but it adds another layer of complexity to the potential conflicts of interest surrounding SEBI’s Chairperson.
SEBI’s Response and the Supreme Court’s Involvement
In response to these allegations, SEBI has issued what appears to be a “show cause” notice to Hindenburg Research, accusing the firm of not providing sufficient disclosure around its short position in Adani stocks. However, SEBI has not addressed the specific allegations or factual findings presented in Hindenburg’s reports. Instead, the regulator’s focus on Hindenburg’s disclosure practices, rather than the substantive issues raised, has been perceived as an attempt to deflect attention from the real concerns.
The Indian Supreme Court has also weighed in on the matter, expressing dissatisfaction with SEBI’s investigation into the Adani Group. The Court has noted that SEBI has “drawn a blank” in uncovering the identities of the offshore shareholders involved in the Adani scandal. This lack of progress has fueled suspicions that SEBI’s investigation might be compromised due to the involvement of its Chairperson in the same offshore funds used by the Adani Group.
Statement from Madhabi Puri Buch and Dhaval Buch
In response to the allegations made by Hindenburg Research, Madhabi Puri Buch and her husband, Dhaval Buch, issued a statement strongly denying the claims. They stated:
“In the context of allegations made in the Hindenburg Report dated August 10, 2024, against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same are devoid of any truth. Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.”
“Further, in the interest of complete transparency, we would be issuing a detailed statement in due course. It is unfortunate that Hindenburg Research, against whom SEBI has taken enforcement action and issued a show cause notice, has chosen to attempt character assassination in response to the same.”
Conclusion: A Question of Regulatory Integrity
Hindenburg Research’s report raises serious questions about the integrity and impartiality of SEBI, particularly in relation to its Chairperson, Madhabi Puri Buch. The connections between Buch, her husband, and the offshore funds linked to the Adani Group, combined with the apparent conflicts of interest involving Blackstone, suggest that SEBI’s inaction on the Adani matter might be influenced by personal financial interests.
As the regulatory body responsible for overseeing India’s financial markets, SEBI’s credibility is crucial for maintaining investor confidence and ensuring fair market practices. The allegations against its Chairperson not only undermine public trust in SEBI but also highlight the need for greater transparency and accountability in the regulation of India’s financial sector.
Hindenburg’s report concludes with a call for further investigation into these conflicts of interest and a demand for more transparency from SEBI. The firm also reiterates its commitment to supporting causes that promote free expression and corporate accountability, emphasizing the importance of holding powerful entities accountable for their actions.
In light of these revelations, it is essential for Indian authorities to take a closer look at SEBI’s leadership and ensure that the regulatory body is free from any conflicts of interest that could compromise its ability to act in the public interest. The integrity of India’s financial markets depends on the impartiality and effectiveness of its regulators, and any doubts about SEBI’s commitment to these principles must be addressed promptly and thoroughly.