Ten listed Adani group stocks, including the flagship Adani Enterprises Ltd and Adani Power Ltd, will be watched closely on Monday morning following a new report by Hindenburg Research. The U.S.-based short-seller has alleged that SEBI Chairperson Madhabi Puri Buch and her husband had stakes in offshore funds connected to the Adani group.
Hindenburg's initial report in January 2023 triggered a $150 billion decline in Adani stocks. In its latest report on August 10, Hindenburg stated it was "unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson."
While both Buch and the Adani group have dismissed these allegations, the market will be closely watching how Adani stocks react to the fresh claims.
"Stock prices are slaves to earnings," said Kranthi Bathini, Director of Equity Strategy at WealthMills Securities. Bathini noted that he would be more concerned if the Hindenburg report raised issues that could impact the Adani group’s earnings. He remarked that aside from the allegations concerning the SEBI Chair, "Most of the claims in the report are already known to the market. Such reports have circulated for some time. Except for a potential knee-jerk reaction lasting a day or two, I doubt the fresh report will significantly harm the Adani group’s earnings potential in the medium to long term."
Vinit Bolinjkar of Ventura Securities does not see Hindenburg allegations as serious. "They are recycling of the same thing. They are trying to connect one event around and into the other, without giving any evidence of criminality. It is old wine in a new bottle, recycled and desperate."
Bolinjkar said though the report could have some impact on Adani stocks and the market in the short term, they should recover soon. Bathini said any steep fall in Adani group stocks could be a buying opportunity.
A market analyst, who did not wish to be named, said the allegations on a sitting SEBI Chair are serious. "This could be the first time that fingers are being pointed at the sitting SEBI Chair. It can impact markets as, whatever said and done, the allegations are serious. They have denied it, and it is expected. This could turn into more of a political issue," he said.
The Hindenburg Research report was released a month after the short-seller received a 46-page show cause notice from SEBI, which Hindenburg dismissed as "nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India."
Hindenburg Research claimed that a Vinod Adani controlled company had invested in 'Global Dynamic Opportunities Fund' (GDOF) in Bermuda, a British overseas territory and tax haven, which then invested in IPE Plus Fund 1, a fund registered in Mauritius, another tax haven.
According to Hindenburg Research, whistleblower documents indicate that Madhabi Buch and her husband Dhaval Buch opened an account with IPE Plus Fund 1 on June 5, 2015, in Singapore. A declaration of funds, signed by a principal at IIFL, stated that the source of the investment was “salary” and estimated the couple’s net worth at $10 million.Hindenburg noted that Madhabi Buch was appointed a “Whole Time Member” of SEBI in April 2017. However, on March 22, 2017, just weeks before this politically sensitive appointment, her husband, Dhaval Buch, allegedly contacted Mauritius fund administrator Trident Trust regarding their investment in the Global Dynamic Opportunities Fund (GDOF).
Hindenburg further claimed that the IPE Plus Fund, beyond being a purported channel for Vinod Adani’s money, had other close ties to the Adani group. The Founder and Chief Investment Officer (CIO) of the IPE Plus Fund was Anil Ahuja, who, according to his biography and exchange disclosures, served as a director of Adani Enterprises for three terms spanning nine years, ending in June 2017. He had previously been a director of Adani Power.
"Sitting below GDOF in the multi-layer structure (two layers below the Global Opportunities Fund), is the IPE Plus fund, a small and obscure offshore fund registered in Mauritius. The IPE Plus Fund had only $38.43 million in assets under management (AUM) at the end of December 2017, per IIFL disclosures. AdaniWatch reported that by March 2017, ATIL, a Vinod Adani company, had a total balance of $40.38 million with GDOF. Thus, while we are unable to see the total assets of parent fund GDOF, it appears a significant portion of the assets of the funds may be comprised of Adani money," it said.
In response to these claims, the Adani Group emphasized that Anil Ahuja, mentioned in the report, served as a nominee director of 3i investment fund in Adani Power from 2007 to 2008 and later as a director of Adani Enterprises until 2017. However, the Adani Group clarified that it has no commercial relationship with the individuals or matters mentioned in what they describe as a deliberate attempt to tarnish its reputation.