By Jayshree P Upadhyay
MUMBAI (Reuters) – U.S.-based short-seller Hindenburg Research said on Saturday that the head of India's market regulator, Madhabi Puri Buch, previously had investments in offshore funds also used by the Adani Group.
In a late-night press release, Buch said the report's allegations were unsubstantiated.
A personal statement from Buch on Sunday said all disclosure requirements had been diligently followed and that the investments in the fund mentioned in the Hindenburg report were made in 2015 in a private capacity, two years before he joined the Securities and Exchange Board of India.
India's markets regulator also asked investors to remain calm and exercise due diligence before reacting to such reports.
The Hindenburg report sparked fresh criticism from India's opposition political parties, which demanded a parliamentary inquiry.
Citing whistleblower documents, Hindenburg said Buch and her husband held stakes in an offshore fund where a substantial amount of money was invested by associates of Vinod Adani, brother of Adani Group Chairman Gautam Adani.
The Adani Group on Sunday rejected the allegations and said its overseas holding structure was completely transparent.
The conglomerate's spokesman described the allegations against Hindenburg as “nothing more than red herrings floated by a desperate entity with complete disregard for Indian laws.”
“Adani Group has absolutely no business relationship with the individuals or matters mentioned in this deliberate and calculated effort to malign our reputation,” the spokesperson said.
In January 2023, Hindenburg published a report alleging tax haven abuse and stock manipulation by Adani Group, triggering a $150 billion sell-off in the conglomerate's stock despite the conglomerate's denial of wrongdoing. The stock has since partially recovered.
The 2023 report also led to an investigation by the regulator headed by Buch, which is still ongoing. In May, six Adani Group companies revealed that they had received notices from SEBI alleging violation of Indian securities market rules.
Along with the investigation into Adani Group, SEBI has sent a “show cause” notice to Hindenburg, alleging that the short seller violated Indian rules by setting up a short bet using non-public information.
In July, Hindenburg called such accusations “absurd.”
In its new report, Hindenburg attempts to link offshore funds that traded Adani Group shares to personal investments by Buch and her husband.
It says the Bermuda-based Global Opportunities Fund, which the Financial Times said was used by entities linked to Adani Group to trade shares in group companies, had sub-funds.
Buch and her husband were investors in one of these sub-funds in 2015, Hindenburg says, citing complaint documents.
In 2017, before Buch was appointed a full-time member of SEBI, her husband applied to be the sole operator of the account, Hindenburg said, citing whistleblower documents.
In 2018, Buch wrote an email seeking to recover her husband's entire investment in the fund, whistleblower documents showed.
In 2022, she was appointed head of the regulatory body.
“We believe our findings raise questions that merit further investigation. We welcome increased transparency,” Hindenburg said.
In a statement, Buch and her husband said their finances were an open book and they did not hesitate to disclose any financial documents to any authority. “Over the years, all the required information has already been provided to SEBI,” they said.
The sub-fund that Buch and her husband invested in, IPE-Plus Fund 1, said on Sunday that it had not invested in any Adani Group stock directly or indirectly.
“No investor has had any involvement in the fund's operations or investment decisions. Ms. Madhabi Buch's and Mr. Dhaval Buch's holdings in the fund accounted for less than 1.5% of the total inflows into the fund,” the fund's asset manager said in a statement to Indian stock exchanges.
The 10-company Adani conglomerate, active in airports, ports, power, gas and other sectors, has benefited from a push by Prime Minister Narendra Modi's government to develop India's infrastructure.
The main opposition Congress party has previously alleged close ties between Adani Group and the ruling Bharatiya Janata Party, which both have denied.
A Congress party spokesperson, in a statement posted on social media platform x late on Saturday, called on the government to “remove all conflicts of interest in the SEBI probe into Adani.”
The party demanded a parliamentary inquiry to “investigate the full scope” of the matter.
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