Adani Group stocks tumbled in today's trade after serious allegations made by US-based short seller Hindenburg against SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch.
However, the market did not react strongly to these allegations as losses were limited to the Adani Group stocks, with mild cuts. This contrasts sharply with the market's response to Hindenburg's initial allegations against the Adani Group in January 2023, which led to a significant loss of USD 150 billion in market value across the conglomerate's 10 listed entities at their lowest point.
SEBI and the Adani Group quickly responded, dismissing the claims as baseless. In addition, investors have largely digested Hindenburg's latest report, which was released over the weekend. Industry experts have discredited these allegations, which aimed to influence the Indian financial markets.
At the time of writing this report, 10 group stocks are trading with cuts of up to 5%, with Adani Total Gas, leading the losses with a drop of 4.9%, followed by another group stocks such as Adani Enterprises, Adani Enterprises, Adani Power, Adani Green Energy, Adani Energy Solutions, Adani Wilmar, Adani Ports & SEZ, ACC, Ambuja Cements, and NDTV are all trading with losses ranging between 1% and 3.25%, respectively.
Background of the Allegations: Hindenburg had previously published a report accusing the Adani Group of operating "the largest con in corporate history." The report revealed a network of offshore shell entities, mainly based in Mauritius, used for undisclosed related-party transactions and stock manipulation. Despite overwhelming evidence, SEBI has taken no public action against the Adani Group, which Hindenburg criticizes as a failure to enforce regulatory oversight.
In June 2024, SEBI issued a 'show cause' notice to Hindenburg, not disputing the facts in Hindenburg's original analysis but claiming that Hindenburg's disclosure around its short position was insufficient. SEBI also labeled Hindenburg's report as "reckless" for quoting a banned broker who alleged SEBI's awareness and participation in schemes like the Adani scandal.
Allegations of SEBI's Complicity: Hindenburg suggests that SEBI's reluctance to act against the Adani Group may be due to the involvement of its chairperson, Madhabi Buch.
"We had previously noted Adani’s total confidence in continuing to operate without the risk of serious regulatory intervention, suggesting that this may be explained through Adani’s relationship with SEBI Chairperson, Madhabi Buch," said Hindenburg.
The report details that Madhabi and Dhaval Buch had invested in the Global Dynamic Opportunities Fund (GDOF) and IPE Plus Fund, offshore entities associated with Vinod Adani.
These investments were allegedly made just before Madhabi Buch's appointment as a whole-time member of SEBI in April 2017, said Hindenburg. It also claims that Dhaval Buch moved the assets out of his wife's name before her appointment to avoid scrutiny.
Offshore Fund Connections: Hindenburg's report elaborates on the connections between the Buchs and the offshore funds. It highlights that the IPE Plus Fund, in which the Buchs had a stake, was part of a multi-layered offshore fund structure managed by India Infoline (now 360 One), a firm with ties to the Wirecard scandal.
The fund had only $38.43 million in assets under management at the end of December 2017, suggesting its obscure nature, it said.
On Sunday, SEBI Chairperson Madhabi Puri Buch and her husband Dhaval Buch issued a detailed response to the recent allegations. They clarified that their investment in the IPE Plus Fund 1, which Hindenburg linked to alleged "Adani stock manipulation," was made well before Madhabi's appointment to SEBI.
According to their statement, the Buchs invested in the IPE Plus Fund 1, managed by 360 ONE Asset and Wealth Management (formerly IIFL Wealth Management), in 2015. They noted that this investment occurred while they were residing in Singapore as private individuals, nearly two years prior to Madhabi's tenure as a Whole Time Member at SEBI.
The statement further explained that their decision to invest was influenced by Mr. Anil Ahuja, the Chief Investment Officer, who is a long-time friend of Dhaval from school and IIT Delhi. Ahuja's extensive career, including roles at Citibank, JP Morgan, and 3i Group plc, was a significant factor in their investment decision. The Buchs redeemed their investment in the fund in 2018 following Ahuja's departure from his role as CIO.
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