India's stock market has been a hot topic of conversation for the past couple of days, with hashtags around it trending on social media. The reason isn't just investor interest, but has more to do with its regulator. Let's break it down a bit. It all started over the weekend when US-based activist-investor Hindenburg Research posted on X (formerly Twitter) that “something big” was coming.
Hours later, it released a report accusing Madhabi Puri Buch – the chief of market regulator Securities and Exchange Board of India (Sebi) – of having links with offshore funds used by the controversial Adani group. Both Ms. Buch and the Adanis have denied wrongdoing. Now, Hindenburg had last year accused the Adani group – founded by Indian billionaire Gautam Adani – of decades of “brazen” stock manipulation and accounting fraud.
The group – which has 10 publicly traded companies, operating across a wide range of sectors, including commodities trading, airports, utilities, ports and renewable energy – had strongly denied the allegations. But the controversy took billions off its market value – it has since mostly recovered – and Sebi is still investigating the allegations. Hindenburg now say that Ms. Buch's links with the funds used by the Adanis have impacted the regulator's investigation.
Ms Buch has denied any conflict of interest and said that the investment was made before she was associated with the regulator. Also, there is no direct evidence so far linking her investment in the funds with Adani Group stocks or Sebi's investigation. The fresh allegations wiped off $2.43bn (£1.9bn) off Adani Group's market value at the end of trading on Monday, though it made a substantial recovery from losses earlier in the day. So what does Hindenburg say? In its report, Hindenburg referred to earlier articles by Financial Times and the Organized Crime and Corruption Reporting Project that linked obscure offshore funds in Bermuda and Mauritius to Mr Adani's business associates.
Hindenburg alleged that Ms Buch and her husband, Dhaval Buch, invested in these sub-funds in 2015. The firm said that weeks before Ms Buch became a whole-time member of Sebi in 2017, her husband wrote to the fund administrator, asking to be made the only person “authorised to operate the accounts”. The report says Ms Buch used her personal email ID to write to a wealth management firm to seek the redemption of her husband's entire investment in the fund. “We suspect Sebi’s unwillingness to take meaningful action against suspect offshore shareholders in the Adani Group may stem from Chairperson Madhabi Buch’s complicity in using the exact same funds used by Vinod Adani, brother of Gautam Adani,” the firm alleged. Hindenburg also flagged Ms Buch's husband becoming an adviser in 2019 for US investment manager Blackstone, which has invested in Indian real estate investment trusts. Pointing to regulatory changes made by Sebi during Ms Buch's tenure as member and chairperson, they alleged that it directly benefitted firms like Blackstone.
What is Ms. Buch's response?
Ms Buch and her husband have said in a statement that the investments referred to in the Hindenburg report were made in 2015 when the couple were private citizens in Singapore, “almost two years before Madhabi joined Sebi, even as a Whole Time Member”.
They said their investment was made because of Mr Buch's childhood friendship with the fund's then chief investment officer Anil Ahuja, who also “had many decades of a strong investing career”.
“As confirmed by Mr Ahuja, the fund did not invest in any bond, equity or derivative of any Adani group company,” their statement said.
The statement added that the market regulator had “strong institutional mechanisms of disclosure and recusal norms”, which they had followed “diligently”.
It called the Hindenburg report an attack on the “credibility of Sebi” and an attempt at “character assassination of its chairperson”.
Regarding the allegation about Mr Buch's role with Blackstone, the couple said the investment firm was part of Ms Buch's “recusal list maintained with Sebi”.
What about Sebi?
The market regulator said in a statement that it had “duly investigated” Hindenburg's allegations against the Adani Group.
It also said that its chairperson had made the required disclosures in “terms of holdings of securities and their transfers”, and that she had recused herself in matters involving “potential conflicts of interest”.
— CutC by Bbc.com
