The Hindenburg-Sebi chief saga has got many twists

Breaking her silence on the ongoing controversy involving SEBI Chairperson Madhabi Puri Buch over alleged conflict of interest for the first time, the Union Finance Minister, Nirmala Sitharaman has recently said that the facts are to be taken on board. However, she was quick to add that Buch and her husband, Dhaval Buch, were responding to several allegations against them with factual clarifications

There has been a host of questions raised on alleged improprieties since 10th August when Hindenburg Research report came out, alleging multiple conflicts of interest by Sebi Chairperson Madhabi Puri Buch.

Even though ICICI Bank has clarified that they had not paid any salary or granted ESOPs to Buch after her retirement other than her retiral benefits since she superannuated in October 2013—the statement further said that Buch received compensation in the form of salary, retiral benefits, bonus and ESOPs, in line with applicable policies. Under the bank’s rules, the ESOPs vest over the next few years from the date of allotment.

According to the rules, employees, including retired ones, had the choice to exercise their ESOPs anytime within 10 years from the date of vesting. While people are going to nitpick further on this, it is logical that there had to be a simpler explanation for the allegations made.

Going by what Quantum Mutual Fund’s Ajit Dayal, a vocal critic of the deal, had spoken about this matter earlier on ‘The Core Report’, the nitpicking would link to whether ICICI Bank was given lenient treatment in its merger with ICICI Securities, a subsidiary of which ICICI Bank owns around 75 per cent. In fact, the bank did not have to go through a price discovery process that made ICICI Securities shareholders feel shortchanged.

The critics used this as a good opportunity to bring attention back to the larger issue of the cases against Adani and the Hindenburg Report which had almost died down.

Surprisingly, the Sebi chairperson has not issued a line-by-line public disclosure on her dealings with issues involving the Adani group, and even on her income in the last decade. Analysts feel that the only way out is to take the issue head-on and not run from it, even if there is a sense of assured protection in keeping silent.

Hindenburg Research accused Sebi Chairperson, Madhabi Puri Buch, of conflict of interest; she and her husband denied all allegations, asserting full disclosure.

In a clarificatory note, Madhabi Puri Buch and her husband, have said in a joint statement, “In the context of allegations made in the Hindenburg Report dated 10th August against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same is devoid of any truth.”

They added, “Our life and finances are an open book. All disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.”

In another development, a member of the Sebi board has clarified, though anonymously, that Buch had not recused herself from the investigation when the Supreme Court directed the Board to probe Hindenburg’s original allegations, then there is little doubt left that she was hiding this from the public and markets alike.

Following Hindenburg’s revelations about her past links with one of the offshore entities, the finance ministry – which governs Sebi has said that it has nothing to add to what Buch had said in her defence.

Madhabi Buch made an interesting statement at a public event she attended in Mumbai recently. She said that for the business environment at large, “regulations and compliances are important as they foster trust in the system”.

Hindenburg has launched a broadside against market regulator Sebi chairperson, alleging she and her husband, Dhaval, had stakes in obscure offshore funds used in the alleged Adani money siphoning scandal.

The Adani Group termed the latest allegations malicious and based on manipulation of select public information. The company said it has no commercial relationship with the Sebi chairperson or her husband.

"Hindenburg Research accused Sebi chairperson Madhabi Puri Buch of conflict of interest; she and her husband denied all allegations, asserting full disclosure"

According to Hindenburg’s allegations, Sebi Chairperson Madhabi Buch, holds 99 per cent stake in an Indian consulting firm called Agora Advisory, where her husband, Dhaval Buch, serves as a director. According to the short-seller, this entity reported $261,000 in consulting revenue in 2022, which is 4.4 times her disclosed salary at Sebi.

Hindenburg also noted that despite lacking experience in the field, Dhaval Buch, the husband of Sebi Chairperson, joined Blackstone, a major global private equity firm and significant investor in India, as a ‘Senior Advisor’ in July 2019, according to his LinkedIn profile.

Blackstone has been one of the largest investors and sponsors of REITs (real estate investment trusts), a nascent asset class in India. While Dhaval Buch was a Senior Advisor and his wife was a Sebi official, Blackstone sponsored Mindspace and Nexus Select Trust, India’s second and fourth REITs to receive Sebi approval for a public IPO.

Hindenburg alleged that during industry conferences, Sebi Chairperson promoted REITs as her ‘favourite products for the future’ but failed to disclose that Blackstone, which her husband advises, stands to benefit significantly from this asset class.

“I do feel that it is a red herring. This must not deter Sebi from pursuing its case against the short-selling fund,” a professor at a business school of India who does not wish to be named said Hindenburg is a short seller, and benefits from a stock falling in price. By their earlier white paper on Adani, they caused the Adani stock price to fall which benefitted them. As a regulator, Sebi has full right to examine the veracity of their claims. After Sebi issued a show cause notice, they attacked the Sebi Chairperson personally. This may be their pressure tactic to deter Sebi from examining their short selling tactics, he further said.

It is premature for anyone to pass a judgment on the Sebi chief. Hindenburg does not seem to have produced any solid evidence of any wrongdoing. The Buchs have provided full disclosures now, and before, he added.

In her first public appearance after the US-based short-seller targeted her for alleged conflicts of interest, Madhabi Puri Buch has stressed that compliance should become a ‘low hum in the background’ of every organisation that the market regulator regulates, adding, “This is our ultimate objective at SEBI”.

In yet another interesting development, Indian billionaire Gautam Adani, is in the advanced stages of setting up a globally focused think-tank, even as independent research groups come under increasing pressure from the country’s authorities.

The New Delhi-based institution, expected to be known as the Chintan Research Foundation, will focus on areas including climate change, the energy transition and international politics. It will launch as early as next month with 1bn ($12mn) of “seed capital” from Adani’s eponymous infrastructure-focused conglomerate, according to people familiar with the matter.

The institute will eventually look to attract outside funding and expand with branches in major Indian cities, including Mumbai and Bengaluru, as well as overseas in Washington and possibly London. The Adani Group declined to comment.

Whatever be the case, there was a need to conduct thorough probe into the matter.