Investment cited by Hindenburg made two years before Madhabi joined Sebi: Buchs

Securities and Exchange Board of India (Sebi) Chairperson Madhabi Puri Buch and her husband Dhaval Buch shared a detailed statement on Sunday, countering.

The allegations made by the US short-seller Hindenburg Research. The Buchs stated that their investment in the fund, which Hindenburg claimed is linked to the alleged “Adani stock manipulation”, was made two years before Madhabi joined Sebi.

In the statement, the Buchs stated that they made an investment in the said fund, IPE Plus Fund 1, managed by 360 ONE Asset and Wealth Management (earlier IIFL Wealth Management) in 2015. This investment was made “when they were both private citizens living in Singapore and almost 2 years before Madhabi joined SEBI, even as a Whole Time Member”, the statement read.

“The decision to invest in this fund was because the Chief Investment Officer, Mr Anil Ahuja, is Dhaval’s childhood friend from school and IIT Delhi and, being an ex-employee of Citibank, JP 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 statement read.

“As confirmed by Mr Ahuja, at no point in time did the fund invest in any bond, equity, or derivative of any Adani group company,” it added.

On Saturday, Hindenburg Research published its second whistleblower report on Adani Group, claiming that Madhabi Puri Buch had a stake in the obscure offshore entities used in the “Adani money siphoning scandal”.

According to Hindenburg, IPE Plus Fund is a small offshore Mauritius fund set up by an Adani director through IIFL. It accused Vinod Adani, brother of industrialist Gautam Adani, of “using this structure to invest in Indian markets with funds allegedly siphoned from over invoicing of power equipment to the Adani Group”.

Hindenburg alleged that just weeks before Buch’s appointment to Sebi, her husband requested the transfer of their investments into his sole control, potentially to avoid any scrutiny related to her new regulatory role.

The report also claimed that Madhabi Buch, while being at Sebi, personally wrote to IIFL in February 2018 using her private G-mail account, doing business through her husband’s name, to redeem the units in the fund.

Sebi, it claimed, has “shown a surprising lack of interest in Adani’s alleged undisclosed web of Mauritius and offshore shell entities”.

In response, the Buchs said the claims made in the Hindenburg report were “baseless” and “devoid of any truth”, and asserted that their finances were an open book. The couple also called it an attempt of “character assassination”.

The 360 ONE Asset Management (formerly IIFL) also denied Hindenburg’s claims, saying that the said IPE-Plus Fund 1 made “zero investments in any shares of the Adani Group either directly or indirectly through any fund”.

The firm also clarified that Madhabi and Dhaval Buch’s holdings in the fund were less than 1.5 per cent of the total inflow into the fund.

Regarding the Hindenburg report’s claims about Dhaval’s association with the investment management company Blackstone and the Sebi chief’s alleged undue favour towards the company, the statement clarified that Dhaval’s appointment was due to his deep expertise in supply chain management and that it occurred before Madhabi’s elevation to the position of Sebi chairperson.

“At no time has Dhaval been associated with the real estate side of Blackstone,” they said.

Hindenburg alleged that during Dhaval’s stint as an advisor to Blackstone, Sebi had proposed, approved and facilitated major changes to the Real Estate Investment Trust (REIT), specifically benefiting private equity firms like Blackstone.

The couple asserted that the Blackstone Group was added to Madhabi’s “recusal list” maintained with Sebi immediately after Dhaval’s appointment.

The latest Hindenburg report comes 18 months after its first whistleblower claim against Adani Group, which led to a sharp decline in the company’s stock value. The short-selling firm accused Adani Group of pulling “the largest con in corporate history” by using a web of companies in tax havens to inflate its revenue and manipulate stock prices, even as debt piled up.

After the Hindenburg report, the Supreme Court asked market regulator Sebi to complete its investigation and set up a separate expert panel to look into regulatory lapses. The panel did not give any adverse report on Adani and the top court too stated that no other probe other than one being done by Sebi was required.

On June 26, Sebi served a show cause notice to Hindenburg, charging it of “deliberately sensationalising and distorting certain facts” as well as working with a New York hedge fund to make its bet.

In the wake of the fresh allegations, the opposition parties urged the government to act immediately to eliminate all “conflicts of interest” in the Sebi’s investigation of the Adani Group and reiterated its demand for a Joint Parliamentary Committee probe into the matter. They also called for the immediate removal of Madhabi Buch as the head of Sebi.