The complex entanglement between the Adani Group, Hindenburg Research, and the Securities and Exchange Board of India (SEBI) has re-entered the spotlight. This time, it has extended beyond Gautam Adani’s business empire, bringing SEBI Chairperson Madhabi Puri Buch into the center of a national controversy. Allegations from the U.S.-based short seller, Hindenburg Research, have once again put both Adani and the regulatory body under scrutiny. 

Hindenburg Research and Its Impact on Adani

Hindenburg Research first made waves in January 2023 with its explosive report titled “Adani Group: How The World’s 3rd Richest Man Is Pulling the Largest Con in Corporate History.” The report accused the Adani Group of engaging in brazen stock manipulation and accounting fraud over several decades. The fallout was immediate and severe. The share prices of Adani companies plummeted by 10%, wiping out approximately $150 billion from the conglomerate’s market value. Gautam Adani, once the third richest man globally, saw his net worth take a significant hit.

In the aftermath, the Adani Group vehemently denied the allegations, yet the damage was already done. The group’s follow-on public offer (FPO) of ₹20,000 crores, which was fully subscribed, was subsequently called off as confidence in the market wavered. Despite the initial turbulence, Adani shares began to recover by June 2024, regaining their pre-Hindenburg levels, seemingly putting the controversy behind them.

The Legal and Regulatory Response

The initial Hindenburg report set off a chain of legal and regulatory actions in India. On March 2, 2023, the Supreme Court of India intervened by setting up a six-member expert committee to investigate whether there was any regulatory failure in dealing with the allegations against the Adani Group. The court also directed SEBI to carry out a specific investigation into potential violations, including the minimum public shareholding norms, failure to disclose related party transactions, and possible stock price manipulation.

The findings of the expert committee were submitted to the Supreme Court on May 8, 2023, in a sealed cover. The report stated that there was no regulatory failure on SEBI’s part and that no apparent pattern of manipulation was detected in Adani companies. Despite these conclusions, the Supreme Court granted SEBI additional time until August 14, 2024, to complete its investigation into the remaining allegations.

By January 2024, the Supreme Court dismissed a plea that sought a Central Bureau of Investigation (CBI) probe into the matter. The court endorsed SEBI’s investigation and rejected the transfer of the case to a Special Investigation Team (SIT). 

The Latest Allegations by Hindenburg Research

Just as the dust seemed to settle, Hindenburg Research made a cryptic post on X (formerly Twitter) on August 10, 2024, stating, “Something big soon India.” On the same day, Hindenburg released new allegations, this time targeting SEBI Chairperson Madhabi Puri Buch and her husband, Dhaval Buch. The research firm alleged that the Buchs had stakes in offshore funds that were linked to the Adani Group’s alleged money siphoning operations.

Hindenburg expressed shock at SEBI’s “lack of interest and not investigating” the Adani companies further, insinuating that the regulator’s reluctance might be due to Buch’s complicity in the alleged fraud. The allegations included claims that Buch ensured that accounts with ties to Adani were registered solely in her husband’s name just two weeks before her appointment as SEBI’s Whole Time Member in 2017. Furthermore, the report suggested that Buch redeemed these stakes through her husband’s name during her tenure at SEBI.

The Response from Madhabi Puri Buch and SEBI

The allegations from Hindenburg Research prompted a swift response from Madhabi Puri Buch and her husband. On August 11, 2024, the Buchs released a joint statement denying the accusations. They clarified that their investment in the offshore funds mentioned by Hindenburg was made in 2015 when they were private citizens living in Singapore, almost two years before Buch joined SEBI as a Whole Time Member.

The statement emphasized that the decision to invest was driven by Dhaval Buch’s trust in the fund’s Chief Investment Officer, Anil Ahuja, a longtime friend with a reputable career in investment. The Buchs also noted that they redeemed the investment in 2018 when Ahuja left his position as CIO of the fund.

SEBI also defended its chairperson, stating that Buch had made all the necessary disclosures required by the regulator’s code of conduct and had recused herself from any matters where there was a potential conflict of interest. SEBI further highlighted that it had robust internal mechanisms for addressing such issues, and the regulator advised investors to remain calm and exercise due diligence.

The Broader Implications

The ongoing controversy raises significant questions about the integrity of India’s regulatory framework and the potential conflicts of interest that may arise within it. Former SEBI officials have weighed in, questioning whether Buch made complete disclosures to the government and whether she recused herself from investigating entities where she or her husband had a direct or indirect interest.

The finance ministry, according to sources, might be inclined to consider concessions for Buch, acknowledging her private-sector background. However, former regulators maintain that, had Buch or her husband been investors in Adani-related entities, it was incumbent upon her to be meticulous in her disclosures and to recuse herself from any related investigations.

The allegations against SEBI Chairperson Madhabi Puri Buch by Hindenburg Research have reignited concerns over the regulatory oversight of the Adani Group. While SEBI and Buch have categorically denied any wrongdoing, the controversy underscores the challenges of maintaining transparency and trust in India’s financial markets. As the saga unfolds, the broader implications for corporate governance and regulatory accountability in India remain in sharp focus.