Hindenburg alleges India market regulator chief held stake in offshore funds used by Adani Group By Reuters

By Jayshree P Upadhyay

MUMBAI (Reuters) -U.S. based short-seller Hindenburg Research alleged on Saturday that the head of India’s market regulator, Madhabi Puri Buch, previously held investments in offshore funds also used by the Adani Group.

In a late night press statement, Buch denied the report’s allegations as baseless, saying she would issue a detailed statement later.

Hindenburg’s report sparked fresh criticism from India’s opposition political parties, who demanded a parliamentary probe.

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.

Adani Group on Sunday rejected the allegations and said its overseas holding structure was fully transparent.

The conglomerate’s spokesperson described the Hindenburg allegations as “no more than red herrings thrown by a desperate entity with total contempt for Indian laws”.

“Adani Group has absolutely no commercial relationship with the individuals or matters mentioned in this calculated deliberate effort to malign our standing,” the spokesperson said.

In January 2023, Hindenburg released a report alleging improper use of tax havens and stock manipulation by Adani Group, setting off a $150 billion sell-off in the conglomerate’s stocks despite its denials of wrongdoing. The stocks have since partially recovered.

The 2023 report also led to an enquiry by the regulator Buch heads, the Securities and Exchange Board of India (SEBI), which is still under way. In May, six Adani Group companies disclosed they had received notices from SEBI alleging violation of Indian stock market rules.

Alongside the inquiry into Adani Group, SEBI sent a “show cause” notice to Hindenburg alleging the short-seller violated India’s rules by setting up a short-bet using non-public information.

Hindenburg in July called those allegations “nonsense”.

In its new report, Hindenburg attempts to link offshore funds that traded in Adani Group shares with personal investments of Buch and her husband.

It says Bermuda-based Global Opportunities Fund, which according to a Financial Times investigation was used by entities connected to Adani Group to trade in the shares of group companies, had sub-funds.

Buch and her husband were investors in one of these sub-funds in 2015, Hindenburg alleges, citing whistleblower documents.

In 2017, before Buch was appointed as a full-time SEBI member, her husband requested to be the sole operator of the account, Hindenburg said, citing whistleblower documents.

In 2018, Buch wrote an email seeking to redeem her husband’s entire investment in the fund, the whistleblower documents showed.

In 2022 she was appointed as head of the regulatory body.

“We think our findings raise questions that merit further investigation. We welcome additional transparency,” Hindenburg said.

Buch and her husband said in a statement their finances were an open book and that they had no hesitation in disclosing any financial documents to any authority. “All disclosures as required have already been furnished to SEBI over the years,” they said.

The sub-fund that Buch and her husband invested in, IPE-Plus Fund 1, said on Sunday it had not invested in any shares of the Adani Group directly or indirectly.

“No investor had any involvement in the fund’s operations or investment decisions. Mrs. Madhabi Buch and Mr. Dhaval Buch’s holdings in the fund were less than 1.5% of the total inflow into the fund,” the fund’s asset manager said in a statement to India’s stock exchanges.

The 10-company Adani conglomerate, active in airports, ports, electricity, 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 the Adani group and the ruling Bharatiya Janata Party, which both have denied.

A spokesperson for the Congress party, in a statement posted on social media platform X late on Saturday, called on the government to “eliminate all conflicts of interest in the SEBI investigation of Adani”.

The party demanded a parliamentary probe to “investigate the full scope” of the matter.