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(Bloomberg) — Hindenburg Research accused the chair of India’s market regulator of conflicts of interest which it said prevented a thorough examination of manipulation and fraud claims at the Adani Group, an allegation she strongly denied.

Hindenburg in a report published Saturday said Madhabi Puri Buch and her husband, Dhaval Buch, invested in offshore entities that were allegedly part of a fund structure in which Vinod Adani — the brother of billionaire Gautam Adani — also had investments.

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The investments by the couple were made in 2015, two years before Madhabi was appointed to the Securities and Exchange Board of India, Hindenburg said, citing whistleblower information and other documents Bloomberg wasn’t able to verify. The fund structure is managed by India Infoline, a financial services and wealth management firm.

“We would like to state that we strongly deny the baseless allegations and insinuations made in the report,” the Buchs wrote in a statement shared by a Sebi representative. “All disclosures as required have already been furnished to Sebi over the years.”

A face-off between Hindenburg and Sebi is escalating, weeks after the US-based firm was queried by the Indian regulator about its scathing report against Adani in early 2023. The report wiped out more than $150 billion in Adani firms’ market value in February last year and led India’s top court to order a Sebi probe on possible Adani violations and any suspicious trading activity.

While Sebi has yet to make a case against the Adani Group, the regulator had sent Adani officials and Hindenburg notices seeking further information on suspected regulatory violations. The US firm, in early July, posted the full notice on its website, detailing the role of an Indian bank and criticizing Sebi on inaction against Adani.

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Hindenburg’s latest broadside at the Indian regulator for not acting tough on Adani comes at a time when the conglomerate has just returned to tapping equity investors and is back on its aggressive growth spree. Adani Energy Solutions Ltd. raised $1 billion through a sale sale while the flagship, Adani Enterprises Ltd., is planning to follow suit.

A spokesperson for the Adani Group said on Sunday that the latest Hindenburg allegations are “manipulative selections of publicly available information.” The ports-to-power Adani conglomerate has repeatedly denied the short seller’s accusations of share manipulation and accounting fraud. 

“The Adani Group has absolutely no commercial relationship with the individuals or matters mentioned” in the latest report, the spokesperson said via a stock exchange filing Sunday. “Our overseas holding structure is fully transparent” with regular disclosures, it added.

Regulatory Crosshairs

Hindenburg’s report on Saturday didn’t explicitly mention the precise nature of its current exposure to the Indian market. While short sellers in recent years have increasingly found themselves in regulatory crosshairs from the US to South Korea, it’s unusual for such a firm to call out the chief of an overseas markets regulator on alleged ethical issues.

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The fund that the Buchs invested in was the IPE-Plus Fund set up through India Infoline or IIFL, Hindenburg said. The company in question now trades as 360 ONE WAM Ltd., and it said Sunday the “IPE-Plus Fund 1 made zero investments in any shares of the Adani Group either directly or indirectly” throughout its tenure in the six years to October 2019.

“The fund was managed as a discretionary fund by the investment manager,” 360 ONE WAM said in an exchange filing. “No investor had any involvement in the fund’s operations or investment decisions.” Holdings by the Buchs in the fund were less than 1.5% of its total inflow, it said.

The Buchs plan to issue a more detailed statement “in the interest of complete transparency.”

“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,” they said. 

A former investment banker and CEO of ICICI Securities, Madhabi moved to Singapore in 2011 where she joined Greater Pacific Capital, an Asia-focused fund. She returned to India in 2017 to be appointed a full-time member of Sebi. In 2022, she was named chair.

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Hindenburg also raised questions about Madhabi promoting real estate investment trusts as a promising asset class without disclosing that Dhaval is now an adviser to Blackstone Inc., which has sponsored two of the four listed REITs in India.

Dhaval has been a senior adviser to Blackstone Private Equity since 2019, before Madhabi became Sebi’s chair.

Blackstone didn’t provide comments to Bloomberg on the report outside of regular business hours in India.

—With assistance from P R Sanjai, Chiranjivi Chakraborty, Preeti Singh and Kartik Goyal.

(Updates with company comments from paragraph 11)

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