Hindenburg report: Why India’s market regulator Sebi is in the eye of a storm

Has the Indian stock market been a topic of conversation for a while now, with keywords trending on social media around it.

The reason is n’t just investor interest, but has more to do with its regulator. This break it down a little.

It all started over the weekend when US-based activist-investor Hindenburg Research posted on X ( formerly Twitter ) that” something big” was coming.

Hours later, it released a report alleging links between Madhabi Puri Buch, the head of the controversial Adani group, and the Securities and Exchange Board of India ( Sebi ) chief executive. Both Ms Buch and the Adanis have denied crime.

Now, Hindenburg had last year accused the Adani group – founded by Indian billionaire Gautam Adani – of decades of “brazen” stock manipulation and accounting fraud.

The team- which has 10 publicly traded companies, operating across a wide range of industries, including commodities investing, airports, utilities, ports and green energy- had clearly denied the allegations.

However, Sebi is also looking into the allegations and billions were lost because of the controversy, which has since largely recovered.

Hindenburg then say that Ms Buch’s connections with the money used by the Adanis have impacted the firm’s research.

Ms. Buch has denied having any conflicts of interest and claimed that the expense occurred before she became a member of the controller. Additionally, there is no conclusive evidence to date linking Sebi’s analysis or Adani Group stocks to her expenditure in the funds.

At the end of trading on Monday, Adani Group’s market value was significantly reduced by the new allegations, which resulted in a$ 2.43 billion ( £1.9 billion ) discount from its earlier losses.

Hindenburg referenced earlier reports by Financial Times and the Organized Crime and Corruption Reporting Project that linked mysterious offshore funds in Bermuda and Mauritius to Mr. Adani’s business partners in its record.

Hindenburg alleged that Ms Buch and her father, Dhaval Buch, invested in these sub-funds in 2015.

Her father wrote to the account executive asking to be made the only person “authorized to run the accounts,” weeks before Ms Buch became a full-time part of Sebi in 2017.

According to the report, Ms. Buch wrote to a wealth management company asking for the forgiveness of her husband’s full stake in the fund using her personal email address.

The Adani Group’s Chairperson’s alleged involvement in using the exact same money used by Vinod Adani, his brother, led to Sebi’s allegations that the company is unwilling to take meaningful action against think offshore shareholders.

Hindenburg even mentioned Ms. Buch’s husband’s appointment as an advisor for US purchase firm Blackstone, which has invested in Indian real estate investment trusts. They claimed that Sebi’s regulation changes during Ms. Buch’s time as a member and chairman had had a direct impact on businesses like Blackstone.

The opportunities mentioned in the Hindenburg review were made in 2015 by Ms Buch and her husband, according to a statement released by them in a speech.

They claimed that Mr. Buch and the then-Chair Investment Officer Anil Ahuja, who likewise “had several decades of a successful investment career,” were friends when they were young.

” As confirmed by Mr Ahuja, the account did not invest in any relationship, capital or variant of any Adani group business”, their statement said.

The market regulation, according to the statement, had” robust institutional mechanisms of disclosure and recusal norms” that they had “diligently followed.

The Hindenburg statement was characterized as an effort at” character assassination of its chairperson” and an assault on Sebi’s credibility.

The couple claimed that Ms. Buch’s “recess record maintained with Sebi” included the investment firm and that Mr. Buch had a relationship with Blackstone.

The industry regulator said in a speech that it had “duly investigated” Hindenburg’s complaints against the Adani Group.

Additionally, it stated that its chairman recused herself in issues involving “potential conflicts of interest” and that she had made the necessary statements in “terms of assets of stocks and their transfers.”

The company described the allegations as” a reuse of rejected claims that have been thoroughly investigated and ] proven to be false” in a statement released on its site on Sunday.

” Our overseas having structure is completely transparent, with all relevant information disclosed regularly in many public files”, it said.

Anil Ahuja, according to the group, was previously a director of Adani Enterprises and a nominee director of Adani Power from 2007 to 2017.

The Adani Group added that it had no business dealings with the people or issues mentioned in this ill-fated, deliberate effort to harm our reputation.

According to Hindenburg’s earlier report, which accused the Adanis of stock manipulation and accounting fraud, their businesses lost almost$ 150 billion from their market value, despite having mostly recovered the losses since then.

In January, in a major relief to the group, India’s top court rejected pleas for an additional investigation into the allegations. It also gave Sebi three months to complete its investigation – that deadline has long passed, but according to Sebi’s latest statement, it has completed 23 inquiries and the last one is “close to completion”.

In June, Sebi also issued a” show-cause notice” to Hindenburg Research, accusing it of violating US securities laws by colluding with an investor who made a short bet against the Adani group ahead of the report’s release. Hindenburg has dismissed the allegation.

Rahul Gandhi, the leader of opposition in India’s parliament, said that the allegations have “gravely compromised” the “integrity” of Sebi,” which is entrusted with safeguarding the wealth of small retail investors”.

His party in the Congress has demanded that the allegations be investigated by the government and that “every aspect of the Adani investigation be resolved in its entirety.”

Mr. Adani has long been accused by opposition politicians of profiting from his political connections, which he denies. He is widely believed to be close to Prime Minister Narendra Modi.

Mr Modi’s Bharatiya Janata Party ( BJP), in turn, has accused the Congress of being “involved in creating economic anarchy” and “hatred against India”.

A top finance ministry official said on Monday that the government had “nothing to add” on the issue as both Sebi and Ms Buch had given statements.

In its response to Ms Buch’s statement, Hindenburg has doubled down on its accusations, saying it raises “numerous new critical questions”.

Sebi, Ms Buch and the Adani Group have n’t reacted yet to the latest comments.

We have n’t yet heard the last of the controversy because opposition politicians are expected to continue raising it.