New Delhi: After whipping up a twitter storm in India after tweeting “Something big soon India”, Hindenburg has come out with what tantamount to a dud: mere insinuations against the Chairperson of SEBI, Madhabi Puri Buch, and her husband, Dhaval Buch. In the absence of any conclusive evidence of their misdeed, this report is at best mud-slinging, meant to create doubts over the conduct of a person who, by most accounts, has led a principled life. In the day and age of unfettered social media, character assassination, especially of someone in a high position, is often a preferred tactic to take them down. So, let’s start by taking a closer look at the allegations made against the Buchs by Hindenburg. Because, as it turns out, Hindenburg’s smoking gun may not have much of fire power after all.
Hindenburg Allegation No. 1: The Buchs had “hidden stakes” in the same Bermuda and Mauritius funds used by Vinod Adani, brother of Gautam Adani.
Closer Look: First of all, if the Buchs wanted to “hide” their investment, they wouldn’t have made it under their own names. Yet, they did so with all personal information made available to the wealth manager, including their passport numbers and even net worth. Second of all, this investment was made in 2015, two years before Madhabu Puri Buch became a full-time Sebi board member. Therefore, she and her husband made the investment as private citizens. Third, we must give the Buchs the benefit of the doubt regarding their investment choice As their wealth manager, it would have been IIFL’s lookout to recommend an investment vehicle, and it is possible that the Buchs wouldn’t have known who all the other investors were in the fund. (I hope the Buchs talk more about this when they issue a more detailed statement.)
Hindenburg Allegation No. 2: The Buchs put money in a fund that had a multi-layered offshore structure.
Closer Look: Well, again, as private citizens living in Singapore at that time, the Buchs had every right to invest as they deemed fit. All they would have needed to do was to disclose their investments (profits and losses) in their income tax filings. In their statement released in the wake of the report, the Buchs state that “all disclosures as required have already been furnished to SEBI over the years. We have no hesitation in disclosing any and all financial documents, including those that relate to the period when we were strictly private citizens, to any and every authority that may seek them.”
Hindenburg Allegation No. 3: Conflict of interest arising from Dhaval Buch’s appointment as advisor to Blackstone.
Closer Look: The other big allegation is the supposed conflict of interest arising from the following points: a) Dhaval Buch being appointed as a senior advisor to private equity fund Blackstone in 2019 while his wife was a whole-time member of SEBI, and b) subsequently SEBI championing REITs (real estate investment trusts), which were a new asset class in the Indian financial market. Again, the world over, private equity firms routinely appoint experienced professionals as advisors for various reasons, including operational oversight of their portfolio companies. And Dhaval Buch is an expert in supply chain and has worked, among others, with one of the best-known companies in the world: Unilever. As for Madhabi Puri Buch championing REITs as the Chairperson of SEBI, well, these are well-established and mature assets in developed markets. In the US, all listed REITs (FTSE) had a market capitalization of $1.3 trillion end of last year. So, clearly, the Sebi chief wasn’t peddling financial snake oil. Blackstone, which is among the top private equity firms globally, is a firm that has invested more than $50 billion in India, and after exits, its asset value in April value stood at $30 billion.
The Buchs have promised to put out a more detailed statement (read rebuttal) on the Hindenburg allegations. I hope they will speak more openly on their investments. Unless something truly damning backed by evidence comes out against them, this episode needs to be dismissed as an attempt by Hindenburg to question the credibility of a regulator that issued it a show cause notice, asking for more disclosures with regard to its report on the Adani Group.
Either way, the last word on this fight hasn’t been said.
(Disclaimer: The views expressed in the column are those of its author, and not News9.)
