Sebi chair Madhabi Buch owns majority in consultancy named in Hindenburg report

Mumbai/Bengaluru: Madhabi Puri Buch, the chief of India’s capital markets regulator, continues to own 99% of a Mumbai-based consulting firm that’s now caught in the crossfire of the Hindenburg Research-Adani Group controversy.

On Saturday, the US short seller alleged that the Securities and Exchange Board of India’s investigations into its January 2023 report of an accounting fraud and manipulation of shares by the Adani Group was compromised.

Hindenburg said this was because of Buch’s stake in offshore entities that the Adani Group had allegedly used to siphon money, apart from impropriety and potential conflict of interest rising from her ownership of the consulting firms.

It also dragged Buch’s husband, Dhaval Buch, and global asset management firm Blackstone Group in which he’s an adviser, into the latest episode of the controversy.

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Both Madhabi Buch and Dhaval Buch in a joint statement strongly denied the allegations, stating that they have made all necessary disclosures. “Our life and finances are an open book. All disclosures as required have already been furnished to Sebi over the years," they said.

In another statement issued later, they said the two consulting companies had become immediately dormant on her appointment with Sebi. “These companies (and her shareholding in them) were explicitly part of her disclosures to Sebi."

Adani Group has denied the January 2023 allegations, although a Sebi enquiry into the matter continues.

Madhabi Buch owns 99% of the stake in Mumbai-based Agora Advisory Pvt. Ltd, regulatory filings show, although she stepped down as a director before she was appointed as a whole time member of Sebi in April 2017.

“I would no longer be able to hold the position of director in any company. I therefore hereby tender my resignation from the position of independent director on the board with effect from 3 April 2017," Buch said in her resignation letter dated 31 March 2017. Three days later, the board of directors in a meeting accepted her resignation.

In 2022, she transferred ownership of Singapore-headquartered Agora Partners to her husband, two weeks after she took charge as the first woman chief of India’s capital markets regulator. Dhaval Buch remains a director at both the consulting firms.

Divided on conflict

Hindenburg’s latest allegations come two months after Sebi issued a show cause notice to the US short seller stating that it had violated Indian regulations, including inadequate disclosures on how it traded and profited. Hindenburg’s report on the Adani Group in January last year had wiped off $50 billion in the conglomerate’s valuations.

But its latest charges against the Sebi chief have corporate governance experts divided on the matter.

“When you are holding the position of Sebi chair, all disclosures regarding your investment in privately held firms should be made in public, possibly through annual reports or on the website," said a Delhi-based corporate governance leader, on condition of anonymity. “It doesn’t matter if the business is small or if you have made the disclosures internally to the board."

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Another industry expert does not see this as a possible case of conflict.

“As long as disclosures regarding ownership of shares in India consulting business and/or any offshore entities is disclosed to Sebi’s internal compliance department on an ongoing basis, and the businesses themselves are not significant, there is no conflict of interest," said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern Research.

“Manipulative selections of public information"

Incorporated in May 2013, Agora Advisory offers advisory and consultancy services to governments, business, commerce, industry, non-profits and other entities, according to filings made to the ministry of corporate affairs.

Agora Advisory lists two directors, including Buch’s husband and Kavita Shah.

However, despite her resignation from the firm’s board in 2017, Buch–who earned ₹3.2 lakh a month, or ₹38.3 lakh a year as Sebi chair (as per September 2023 disclosures by Sebi)–continued to own majority equity in Agora Advisory.

As on 31 March, she held 9,900 shares of ₹10 each, or 99% of the equity in Agora Advisory, while the remaining 1% is owned by Kavita Shah, per MCA filings.

Agora Advisory earned ₹14 lakh in revenue in the financial year ended March, a 65% decline from the ₹40.8 lakh it made in 2022-23. Net profit plunged 59% to ₹8.1 lakh. Financial details of the Singapore-based Agora Partners Pte were not available.

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Hindenburg Research on Saturday alleged that Sebi was unwilling to act on its report on the Adani Group because Buch and her husband had invested in offshore funds having links with the conglomerate.

Buch and her husband “first appear to have opened their account with IPE Plus Fund 1 on 5 June 2015 in Singapore", as per whistleblower documents, the short seller said. The fund, it said, was a small offshore Mauritius entity set up by an Adani Group director through wealth management firm IIFL.

The Adani Group rejected the allegations, terming them as “malicious, mischievous and manipulative selections of publicly available information to arrive at predetermined conclusions for personal profiteering with wanton disregard for facts and the law".

360 One WAM Ltd, formerly known as IIFL Wealth Management Ltd, said in a statement on Sunday that the fund was managed as a discretionary fund by the investment manager and no investor had any involvement in its operations or investment decisions.

“Mrs. Madhabi Buch & Mr. Dhaval Buch’s holdings in the fund were less than 1.5% of the total inflow into the fund," 360 One WAM said, adding that the IPE-Plus Fund 1 was launched in October 2013 and operated until October 2019.

“Throughout the fund’s tenure, IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly through any fund."