Hindenburg Research, a New York-based short seller, recently accused Madhabi Puri Buch, the chairperson of India’s Securities and Exchange Board (SEBI), of having conflicts of interest linked to Adani Group, a notable Indian conglomerate. The allegations, rooted in leaked emails, claim that Buch’s offshore investments and ties to the Adani family have compromised her ability to conduct an impartial investigation into the company. This report has sparked significant controversy and discussions within India’s financial and political spheres.
In earlier reports, Hindenburg accused Adani Group of significant financial misconduct, including stock manipulation and accounting fraud. These previous allegations caused a substantial decline in Adani Group’s stock value. Despite the initial fallout, the market capitalization of the conglomerate has largely recovered, though some subsidiaries remain below their pre-report levels. Hindenburg’s ongoing scrutiny of Buch and Adani Group highlights persistent concerns about regulatory integrity in India’s financial markets.
Buch’s Alleged Conflicts
Hindenburg’s recent report asserts that Buch has investments in 360 ONE WAM, a Mumbai-based wealth management firm, exposing her to Adani Group shares. Additionally, Buch and her husband are said to own stakes in Mauritius-based shell companies connected to Vinod Adani, Gautam Adani’s older brother.
“Her offshore investments introduce a potential conflict of interest in her regulatory duties,”
Hindenburg argued. Documents from Reuters further revealed that Buch earned revenue from Agora Advisory Private Limited, a firm in which she holds a 99% stake, potentially violating SEBI rules.
Political Reactions and SEBI’s Response
The allegations have provoked strong reactions. Members of India’s congress have called for Buch’s resignation, while a BJP spokesperson dismissed the claims as baseless. Buch has defended herself, stating she has made all required disclosures.
“I have complied with all necessary regulatory disclosures,”
Buch insisted. SEBI and the Institutional Investor Advisory Services in India have reiterated her stance, affirming there was no wrongdoing. Despite this, Adani Group shares fell by 1% on the day Hindenburg’s report was published but later recovered.
Meanwhile, SEBI issued a show cause notice to Hindenburg, alleging the firm exaggerated facts in their reports and misled investors. Responding robustly, Hindenburg made the show cause letter public, emphasizing that they had prominently disclosed their short position on Adani Group.
“Virtually everyone knew we were shorting Adani,”
they claimed.
Adani Group’s rapid expansion over the past 15 years has been marked by frequent acquisitions, primarily managed through Adani Enterprises. The group’s growth is intertwined with the political rise of India’s Prime Minister Narendra Modi. The company’s influence and reach have been further solidified by its ability to spin off mature acquisitions into independent entities. On average, Adani Group has completed two acquisitions annually over the last three years, cementing its dominant position in India’s economic landscape.
The ongoing scrutiny of SEBI and its Chairperson Buch underscores the delicate balance between regulatory oversight and corporate influence in India. Allegations by Hindenburg, coupled with Buch’s defense and SEBI’s counterclaims, highlight a complex landscape where transparency and integrity are continually tested. As investigations continue, the credibility of India’s financial regulatory framework remains in the spotlight, with the potential for significant implications on investor confidence and market stability.
