Twist in Hindenburg-Adani Saga….SEBI Chairperson has been accused

Who are Hindenburg?

Its an Investment advisory firm which engages in Short Selling. It is funded by George Soros.

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What’s the Hindenburg-Adani Saga?

In Jan 23 / Feb 23 Hindenburg released a report accusing Adani’s of Stock manipulation in group stocks via undisclosed transactions & related party transaction while its FPO was open. As a result, stock prices crashed & FPO was withdrawn by Adani’s in public interest

Detailed Investigation was conducted by authorities & Adani’s were given a clean cheat by the authorities against the accusations levied

Subsequently, Hindenburg was also show caused by SEBI for issuing such false report

This seems to hurt the Hindenburg & they have now attached SEBI Chairperson directly in the report issued on 10th Aug 24. Link of the report is as below:

https://hindenburgresearch.com/sebi-chairperson/

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Key points highlighted in the report are as below:

ü? SEBI Chairman & her spouse are alleged to have stakes in offshore entities linked to the Adani Group's financial misconduct which were used to siphon funds. These funds were complex & obscure.

ü? SEBIs impartiality questioned due to potential conflict of Interest, lenient investigation & transparency

ü? The report calls for greater scrutiny of SEBI’s investigations into the Adani Group

ü? Promoting asset class like ReITs, InvITs, etc is for the benefit of one large multinational financial conglomerate (her spouse is part of Blackstone Inc)

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Two things as highlighted by an eminent criminal lawyer are:

1.????? There is no evidence anywhere in the Report to back the claim that the SEBI Chairperson took any bribes. Routine investment instruments have been sensationalised in the Report to create an impression of ill-gotten & opaque wealth.

2.????? Report tries to spin the illusion that the mere existence of an offshore entity implies that some criminal activity has taken place. Without any evidence linking a decision or favour to the alleged beneficiary - the Adani Group - the Report clumsily recycles its own earlier claims which were debunked by the Supreme Court.

No criminal court anywhere in the world would take cognisance of this “material” as no criminality is made out. With each passing day, it only becomes clearer that there is a desperate cabal operating in India & abroad aiming to destabilise Indian markets & ultimately overthrow Prime Minister @narendramodi I hope, for the sake of democracy & India, that our investigating agencies are alive to this very real & present danger.

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Here is the excerpts of Press statement from Madhabi Puri Buch & Dhaval Buch.

1.????? Madhabi & Dhaval Buch both are an alumnus of IIM Ahmedabad & IIT Delhi respectively.

2.????? They have a corporate career of over two decades in banking & financial services, largely in the ICICI Group & 35 years in Hindustan Unilever Limited in India & then in Unilever globally as part of its senior management team.

3.????? During this long period, Madhabi & Dhaval have accrued their savings through their salaries, bonuses & stock options. Insinuations about their net worth & investments referencing Madhabi's current government salary is malicious & motivated.

4.????? From 2010 to 2019, Dhaval lived & worked in London & in Singapore – both with Unilever.

5.????? From 2011 to March 2017, Madhabi lived & worked from Singapore, initially as an employee of a Private Equity firm & subsequently as a consultant.

6.????? The investment in the fund referred to in the Hindenburg report was made in 2015 when they were both private citizens living in Singapore & almost 2 years before Madhabi joined SEBI, even as a Whole Time Member.

7.????? The decision to invest in this fund was because the Chief Investment Officer, Mr Anil Ahuja, is Dhaval's childhood friend from school & IIT Delhi &, being an ex-employee of Citibank, J.P. Morgan & 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.

8.????? As confirmed by Mr. Ahuja, at no point in time did the fund invest in any bond, equity, or derivative of any Adani group company.

9.????? 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.

10.?? On his appointment, the Blackstone Group was immediately added to Madhabi's recusal list maintained with SEBI.

11.?? Over the last two years, SEBI has issued more than 300 circulars (including “Ease of Doing Business” initiatives in line with the developmental mandate of SEBI) across the entire market eco-system. All regulations of SEBI are approved by its Board (& not by its Chairperson) after extensive public consultation. Insinuations that a handful of these matters related to the REIT industry were favours to any specific party are malicious & motivated.

12.?? The two consulting companies set up by Madhabi during her stay in Singapore, one in India & one in Singapore, became immediately dormant on her appointment with SEBI. These companies (& her shareholding in them) were explicitly part of her disclosures to SEBI.

13.?? After Dhaval retired from Unilever in 2019, he started his own consultancy practice through these companies. Dhaval's deep expertise in Supply Chain allowed him to work with prominent clients in the Indian industry. Thus, linking accruals in these companies to Madhabi's current government salary is malicious.

14.?? When the shareholding of the Singapore entity moved to Dhaval, this was once again disclosed, not just to SEBI, but also to the Singapore authorities & the Indian tax authorities.

15.?? SEBI has strong institutional mechanisms of disclosure & recusal norms as per the code of conduct applicable to its officers. Accordingly, all disclosures & recusals have been diligently followed, including disclosures of all securities held or subsequently transferred.

16.?? Hindenburg has been served a show cause notice for a variety of violations in India. It is unfortunate that instead of replying to the Show Cause Notice, they have chosen to attack the credibility of the SEBI & attempt character assassination of the SEBI Chairperson.

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Link to full text of SEBI Chairman’s Press Release on issues pertaining to them in their personal capacity is as below:

https://www.cnbctv18.com/market/stocks/full-text-of-the-sebi-chief-madhabi-puri-buchs-response-to-hindenburgs-allegations-19458111.htm

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Link to SEBIs Press Release on 11th Aug 24: https://www.sebi.gov.in/media-and-notifications/press-releases/aug-2024/sebi-statement-on-the-hindenburg-research-s-report-dated-august-10-2024_85606.html

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By CA Kunal Kedia, FRM, IIMB, CAIIB, B. Com (H)

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Source: SEBI, News Articles, Hindenburg Report, Excerpts of an eminent Lawyer, etc.,