Sebi regulations around REITs benefited Blackstone Private Equity where Madhabi Puri Buch’s husband Dhaval Buch was Senior Advisor, alleges Hindenburg

"Our life and finances are an open book," said Madhabi Puri Buch and Dhaval Buch in a joint statement.

Hindenburg Research in its latest report has levelled serious allegations against SEBI Chairperson Madhabi Puri Buch, raising questions about potential conflicts of interest during her tenure as a key official at India’s market regulator.

The controversy centres around the appointment of her husband, Dhaval Buch, as a senior advisor to Blackstone in 2019 and the subsequent regulatory changes benefiting the real estate investment trust (REIT) sector, in which Blackstone is a significant player.

A real estate investment trust (REIT) is an investment vehicle that owns revenue-generating real estate or infrastructure assets. The US-based short-seller stated that Dhaval Buch, who spent most of his career at consumer goods giant Unilever, joined Blackstone as a Senior Advisor in July 2019 despite never having "worked for a fund, in real estate or at a capital markets firm".

His LinkedIn profile highlights his experience in procurement and supply chain management but shows no prior involvement in the financial sector, real estate, or capital markets, Hindenburg pointed out.

Despite this lack of relevant experience, he was brought on board by Blackstone, a global private equity firm with significant investments in India, particularly in the REITs, a relatively new asset class in the country. India’s first REIT, Embassy, was sponsored by Blackstone and received SEBI approval in April 2019, just three months before Dhaval Buch joined the firm, Hindenburg pointed out.

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Over the next few years during Dhaval Buch’s time as senior advisor at Blackstone, while his wife Madhabi was a SEBI official, Blackstone sponsored additional REITs, including Mindspace REIT, which became India’s second publicly traded REIT in August 2020, and Nexus Select Trust, which listed in May 2023, the latest report added.

The financial forensic firm has alleged that during this period, SEBI introduced several regulatory changes that significantly impacted the REIT market. These included seven consultation papers on REITs, three updates to the Master Circular on REITs, new regulatory frameworks for micro, small, and medium REITs, and new board nomination rights for unit holders like Blackstone.

These changes, which were implemented while Madhabi Buch held senior positions at SEBI, have been seen as disproportionately benefiting private equity firms such as Blackstone, Hindenburg said, adding that the timing of these regulatory changes has raised eyebrows, particularly given Dhaval Buch’s role at Blackstone and his wife’s influential position at SEBI.

"During this time, Blackstone cashed out its entire stake in Embassy REIT, in December 2023 valued at circa Rs 71 billion (US $853 million at the time), in India’s largest block trade of the year, per media reports," Hindenburg report said.

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Adding to the allegations, the US-based short seller highlighted that during industry conferences, Madhabi Buch has touted REITs as her “favourite products for the future” and even urged investors to look “positively” upon the asset class".

While making those statements, she omitted to mention that Blackstone, who her husband advises, stands to gain significantly from the asset class, it alleged.

"In the context of allegations made in the Hindenburg Report dated August 10,2024 against us, we would like to state that we strongly deny the baseless allegations and insinuations made in the report. The same are devoid of any truth. Our life and finances are an open book. 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. Further, in the interest of complete transparency, we would be issuing a detailed statement in due course. It is unfortunate that Hindenburg Research against whom SEBI has taken an Enforcement action and issued a show cause notice has chosen to attempt character assassination in response to the same," reads a press statement by SEBI chairperson Madhabi Puri Buch and her husband Dhaval Buch.