The targets of Hindenburg's Saturday night assault pushed back on Sunday, denying conflict of interest, claiming transparency, and accusing the US short-seller of character assassination.
Madhabi Puri Buch, chairperson of the Securities and Exchange Board of India (Sebi), and her husband Dhaval Buch issued a point-by-point rebuttal to the claims made by Hindenburg Research, while the regulator defended its own record in a separate statement. Separately, the Adani group and investment firm 360 One, also named by Hindenburg, rubbished its newest report.
“All disclosures and recusals have been diligently followed, including disclosures of all securities held or subsequently transferred”, the Sebi chairperson and her husband Dhaval Buch said in their statement.
Citing whistleblower documents, Hindenburg alleged that the Buch couple owned stakes "in both obscure offshore funds used in the Adani money siphoning scandal.” The two funds refer to Bermuda-based Global Dynamic Offshore Fund and Mauritian IPE Plus Fund 1, managed by 360 One. These two funds were allegedly used by Gautam Adani's brother Vinod to invest in the shares of the Adani Group, in violation of Sebi's public shareholding norms.
Regarding the Mauritius fund, the Buchs' joint statement said the "investment in the fund referred to in the Hindenburg report was made in 2015 when they were both private citizens living in Singapore and almost 2 years before Madhabi joined Sebi, even as a whole-time member."
In a statement to the stock exchanges, 360 One, earlier called IIFL Wealth & Asset Management, said, “Throughout the fund's tenure, IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly through any fund.” It added that the fund invested over 90% of its assets in bonds.
Hindenburg's latest report said the founder and chief investment officer of IPE-Plus Fund was Anil Ahuja, who served three terms across nine years through June 2017 as a director of Adani Enterprises, the port-to-energy conglomerate's flagship.
"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," alleged Hindenburg. Referring to the Sebi probe into the identity of the offshore fund holders in Adani group companies, Hindenburg alleged, “If Sebi really wanted to find the offshore fund holders, perhaps the Sebi chairperson could have started by looking in the mirror”.
In a rebuttal to this, Buch said, "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, 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.”
According to Hindenburg, the redemption in the IPE Plus Fund was worth $8,72,000.
Responding to the allegation of Dhaval Buch's appointment to global private equity giant Blackstone as a senior advisor despite not having worked for a fund in real estate or capital markets before, the statement said, “Dhaval’s appointment, in 2019, as senior advisor to Blackstone Private Equity was on account of his deep expertise in supply chain management. Thus, his appointment pre-dates Madhabi’s appointment as SEBI chairperson. This appointment has been in the public domain ever since. At no time has Dhaval been associated with the real estate side of Blackstone." When he joined Blackstone, the private equity group was immediately added to Madhabi’s recusal list maintained with Sebi, the statement added.
On Hindenburg's charge that the Sebi chairperson continued to have 100% stakes in two consultancy firms -- Agora Partners in Singapore and Agora Advisory in India -- the joint statement clarified that the two had “immediately become dormant on her appointment with Sebi”. The companies and her shareholding, both had been disclosed to Sebi, it said.
Sebi, in its own statement, said it has investigated all allegations against the Adani group, and that chairperson Madhabi Buch made relevant disclosures and recused herself in matters involving potential conflicts of interest.
The regulator said it has duly investigated the allegations made by Hindenburg against Adani, and said that the last of its 26 investigations is nearing completion.
Former Sebi wholetime member and founder of Sahoo Regulatory Chambers, M.S. Sahoo said that if the transaction was permissible at the time of the transaction and executed in the specified manner, it cannot be illegal after (s)he occupies a public office.”
Sahoo also suggested that Hindenburg ought to have followed procedure in case of grievance over the chairperson’s conflict of interest. This was echoed by other experts.
“If the Sebi board concluded that there is a conflict of interest, the involved member or chairman must refrain from participating in the matter. The chairman or entire board will then delegate the issue to another member or a committee of members for resolution,” Sumit Agrawal, founder, Regstreet Law Advisors & former Sebi officer said. The Sebi board consists of whole-time member and part-time members, including officials from the finance and corporate affairs ministries, deputy governor of the Reserve Bank of India and academics.
Securities lawyer Chirag M. Shah said that if the SEBI board found any merit at all in the allegations, then the board in consultation with the finance ministry could form a committee to enquire into the allegations and the said committee's findings will determine the further course of action.
Earlier last month, Sebi issued a notice to Hindenburg to show cause why action ought not be taken for a variety of violations in India. Hindenburg denounced the same on its online blog as baseless with an intended to silence its allegations against the Adani Group. The joint statement said instead of responding to this notice, Hindenburg was choosing to attack Sebi’s credibility.
