Rama Krishna Sangem
Bump ride ahead for Indian stock markets on Monday, August 12. Markets are likely to see a knee-jerk reaction at best on Monday, a day after US-based short-seller Hindenburg Research alleged that Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch along with her husband, Dhaval Buch, had stake in obscure offshore entities used in the alleged Adani money siphoning scandal.
The allegations by Hindenburg Research came after a suspenseful Saturday morning that promised ‘something big soon India’. The US-based short-seller said that Indian stock market regulator Sebi took no public action against Adani Group and instead sent the US-based short-seller a ‘showcause’ notice.
The Sebi show cause notice, Hindenburg Research said, claimed that their report was “reckless” for quoting a banned broker with specific experience dealing with SEBI who detailed how the regulator was fully aware that firms like Adani used complex offshore entities to flout rules, and that the regulator participated in the schemes.
“Adani’s total confidence in continuing to operate without the risk of serious regulatory intervention, suggesting that this may be explained through Adani’s relationship with Sebi Chairperson, Madhabi Buch,” Hindenburg Research said. Analysts believe that these statements are mere allegations, which, at best, can trigger a knee-jerk reaction in the markets when they open for trade on Monday.
“There can be a knee-jerk reaction in the markets reaction to Hindenburg’s report on the Sebi chairperson as these allegations are against a sitting Sebi chief. That said, the recovery in the markets should be equally swift. The problem will arise only if Sebi chairperson Madhabi Puri Buch is asked to go on leave due to these allegations – something we saw earlier with Chanda Kochhar’s case at ICICI Bank,” said Ambareesh Baliga, an independent market analyst.
Connection between Madhabi Puri Buch, Dhaval Buch and IIFL Madhabi Buch and her husband Dhaval Buch, Hindenburg said, first appear to have opened their account with IPE Plus Fund 1 on June 5, 2015 in Singapore, per whistleblower documents. A declaration of funds, signed by a principal at IIFL states that the source of the investment is “salary” and the couple’s net worth is estimated at $10 million.
Madhabi & Adani deny the allegations
Of course, both Madhabi Puri Buch and Adani group have denied the allegations of Hindenburg and termed them as just baseless and malicious allegations intended to tarnish their reputation. But, the opposition parties have demanded an investigation by a JPC (Joint Parliamentary Committee) into the allegations. As the parliament is adjourned last weekend, their demand may not have much traction, unless this issue drags on till the next session.
As already the Supreme Court has gone into the Hindenburg’s earlier allegations and almost gave chit and Adani group has almost recovered the shock in 18 months, there may not be much of substantial damage to either Sebi or the company. But, stock markets might see a great degree of volatility for sometime – may be a couple of trading sessions – and then settle down.
Whether Madhabi will step down and Sebi order a fresh probe into the allegations is to be seen. Similarly, whether the SC will again reopen the issue and call for some sort of transparent re-check too is to be seen. Overall, Hindenburg’s charges this time more to do with the wrongful behaviour of the persons holding high institutions. Less to do with the actual market forces that decide the share value of Adani group.
