Taking note of the report published by Hindenburg Research on Saturday (August 10, 2024), the Securities and Exchange Board of India on Sunday (August 11, 2024) denied all allegations and advised investors to remain calm and exercise due diligence before reacting to such reports.
“Investors may also like to take note of the disclaimer in the report that states that readers should assume that Hindenburg Research may have short positions in the securities covered in the report,” SEBI said in a statement.
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SEBI denied the allegations that it had not taken any action against the Adani Group and made changes in the SEBI (REIT) Regulations, 2014 to benefit Blackstone.
It said “claims that such regulations, changes to regulations or circulars issued related to REITs were to favour one large multinational financial conglomerate, are inappropriate.”
On the Hindenburg report seeking to question SEBI’s action in issuing a show-cause notice to it on June 27, 2024, SEBI said: “The show-cause notice in question, alleging violations of securities laws by Hindenburg Research, has been issued by following the due process of the law.”
“The proceedings in this matter are ongoing and the same is being dealt with in accordance with the established procedure and in compliance with the principles of natural justice,” it added.
Emphasising that SEBI has adequate internal mechanisms for addressing issues relating to conflict of interest, which include disclosure framework and provision for recusal, it said relevant disclosures required in terms of holdings of securities and their transfers have been made by the Chairperson from time to time.
“Chairperson has also recused herself in matters involving potential conflicts of interest. SEBI, over the years, has built a robust regulatory framework that not only aligns with best global practices but also ensures protection of investors,” the market regulator said.
In a separate statement, SEBI Chairperson Madhabi Puri Buch and her spouse Dhaval Buch accused of favouring the Adani Group by the Hindenburg Research report, have dismissed the allegations in a detailed statement released on Sunday.
The investments in the fund [IPE Plus Fund 1] referred to in the Hindenburg report were made in 2015 when the couple were private citizens living in Singapore, they said in the statement, in addition to explaining the reasons behind investing in that fund.
“The decision to invest in this fund was because the Chief Investment Officer, Anil Ahuja, is Dhaval’s [Mr. Buch] childhood friend from school and IIT Delhi and, being an ex-employee of Citibank, J.P. Morgan and 3i Group plc, had many decades of a strong investing career. The fact that these were the drivers of the investment decision is borne out by the fact that when, in 2018, Mr. Ahuja, left his position as CIO of the fund, we redeemed the investment in that fund,” the couple said in the statement.
They further said that at no point did the fund invest in any instruments related to any company of Adani as disclosed by Mr. Ahuja.
Regarding allegations of benefitting Blackstone where Mr. Buch was in an advisory role, the couple said that the appointment “was on account of his deep expertise in Supply Chain management” and that it predated Ms. Buch’s appointment as SEBI Chairperson.
They added that all disclosures regarding where Ms. Buch worked during her stay in Singapore before taking up the SEBI assignment as whole-time Director in 2017 were made and Blackstone Group “was immediately added to Ms Buch’s recusal list maintained with SEBI.”
“At no time has Dhaval been associated with the Real Estate side of Blackstone,” they said.
Stating that all regulations of SEBI were approved by its Board (and not by its Chairperson) after extensive public consultation, they said insinuations that a handful of these matters related to the REIT industry were favours to any specific party are malicious and motivated.
“SEBI has strong institutional mechanisms of disclosure and recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures and recusals have been diligently followed,including disclosures of all securities held or subsequently transferred” they added.
Emphasising that Hindenburg has been served a show-cause notice for a variety of violations in India, they said, “It is unfortunate that instead of replying to the Show Cause Notice, they have chosen to attack the credibility of the SEBI and attempt character assassination of the SEBI Chairperson.”
Adani Group too denied the allegations by Hindenburg and added that their overseas holding structure was “fully transparent” in a regulatory filing.
360 One Wam Ltd (formerly IIFL Wealth Management), the firm that managed the IPE Plus Fund 1, which Hindenburg has alleged Ms. Buch to have invested in, said no money from the fund was invested in Adani Group directly or indirectly and that 90% of their $48 million Asset Under Management (AUM) was invested in bonds.
Moreover, Ms. Buch and Mr. Buch held just 1.5% of the fund’s total inflow, the fund house added in its statement.
Hindenburg’s reply
Reacting to the Buchs’ rebuttal of their report red-flagging their investments in obscure offshore funds linked to the Adani Group and ownership of consulting firms in Singapore and India, Hindenburg Research in a series of posts on X said the clarification contains several important “admissions”, raises fresh questions and confirms a “massive conflict of interest”.
“Buch’s response now publicly confirms her investment in an obscure Bermuda/Mauritius fund structure, alongside money allegedly siphoned by Vinod Adani. She also confirmed the fund was run by a childhood friend of her husband, who at the time was an Adani director. SEBI was tasked with investigating investment funds relating to the Adani matter, which would include funds Ms. Buch was personally invested in and funds by the same sponsor which were specifically highlighted in our original report. This is obviously a massive conflict of interest,” the firm pointed out.
On Ms. Buch’s remarks that her husband used the consulting entities, starting in 2019 to transact with unnamed “prominent clients in the Indian industry”, Hindenburg asked if these included clients SEBI is tasked with regulating.
Pointing to the promise of a “commitment to complete transparency” in the statement, Hindenburg Research asked if she will publicly release the “full list of consulting clients and details of the engagements, both through the offshore Singaporean consulting firm, the Indian consulting firm and any other entity she or her husband may have an interest in”.
Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
