All you need to know about the Hindenburg-Adani-Buch saga

Adani denied the allegations. Most Adani shares have now recovered.

What happened after that?

On March 2, 2023, the Supreme Court set up a six-member expert committee to investigate whether there was regulatory failure in dealing with the alleged contravention of laws by the Adani Group or other companies.

Separately, the court asked Sebi, which was already looking at allegations against Adani companies, to specifically investigate if there was a violation of the minimum public shareholding norms in public limited companies, a failure to disclose transactions with related parties, or any manipulation of stock prices.

In May 2023, the expert committee said that the markets regulator “had drawn a blank” in its investigation into alleged violations in money flows from offshore entities into Adani companies.

In November 2023, the court said it had no reason to discredit Sebi, and that it did not have to treat the contents of the Hindenburg report as the “true state of affairs”.

On January 3, 2024, the court endorsed Sebi’s investigation, and refused to transfer the case to a Special Investigation Team (SIT) or the CBI. It said Sebi had completed the probe in 20 out of 22 matters, and asked it to finish the job within three months. Sebi completed its probe into one more case in March, and has said the final investigation is close to completion.

What has Sebi been doing in this period?

On July 1, 2024, Hindenburg announced that it had received a show cause notice from Sebi for short selling of Adani Enterprises Ltd stock immediately before and after the release of its January 2023 report. The notice named Hindenburg Research, its founder Nathan Anderson, partner-investor Mark Kingdon, and three entities owned or controlled by Kingdon: Kingdon Capital Management LLC, M Kingdon Offshore Master Fund LP, and K India Opportunities Fund (KIOF) – Class F.

Hindenburg also said Sebi’s notice had “conspicuously failed to name…Kotak Bank, one of India’s largest banks and brokerage firms…, which created and oversaw the offshore fund structure used by our investor partner (Kingdon) to bet against Adani”.

A day later, Kotak Mahindra International Limited (KMIL) and KIOF stated that Hindenburg was never their client, nor had it ever been an investor in the Fund. The Fund was not aware that Hindenburg was a partner of any of its investors, it said.

What is Hindenburg’s new allegation?

Hindenburg has now alleged that “it suspects Sebi’s unwillingness to take meaningful action against suspect offshore shareholders in the Adani Group may stem from Sebi Chairperson Madhabi Puri Buch’s complicity in using the exact same funds used by Vinod Adani, brother of Gautam Adani”.

Quoting “whistleblower documents”, Hindenburg alleged, “Sebi’s Chairperson had stake in obscure offshore entities used in the Adani money siphoning scandal.” It said Sebi was yet to take any action against other suspect Adani shareholders operated by wealth management firm India Infoline — EM Resurgent Fund and Emerging India Focus Funds.

Hindenburg alleged that Buch had ensured that accounts with ties to Adani “be registered solely in the name of Dhaval Buch”, her husband, two weeks before her appointment as Sebi Whole Time Member, and had subsequently redeemed the funds “through her husband’s name”.

“Despite disclaiming control, a private email she sent a year into her Sebi term (in 2018) shows she redeemed stakes in the funds through her husband’s name…,” Hindenburg has alleged.

How has the Sebi chairperson responded to the allegations?

Madhabi Puri Buch and Dhaval Buch have said their investment in the offshore funds mentioned by Hindenburg were made in 2015 when they were “private citizens” living in Singapore. The investment was made “almost 2 years before Madhabi joined Sebi…as a Whole Time Member”, they have said.

“The decision to invest in this fund was because the Chief Investment Officer, Anil Ahuja, is Dhaval’s childhood friend from school and IIT Delhi and, being an ex-employee of Citibank, JP Morgan and 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, Ahuja left his position as CIO of the fund, we redeemed the investment in that fund,” the Buchs have said.

From 2011 to March 2017, Madhabi lived and worked from Singapore, initially as an employee of a private equity firm and subsequently as a consultant. The two consulting companies she set up, one each in India and Singapore, became dormant on her appointment at Sebi. These companies (and her shareholding in them) were explicitly part of her disclosures to Sebi, they have said.

What position has Sebi taken?

On Sunday, the regulator defended Buch. She has from time to time made relevant disclosures required in terms of holdings of securities and their transfers, Sebi said. “Chairperson has also recused herself in matters involving potential conflicts of interest,” it said.

“…More than 100 communications have been made seeking assistance from domestic/ foreign regulators and external agencies. Also, more than 300 documents…have been examined” during the probe into the Hindenburg matter, Sebi said. It advised investors to remain calm and exercise due diligence.