Hindenburg Report: Why Corporate Law Firms Are Advocating For Madhabi Buch's Tenure Extension? Know All About ‘Gold Cadbury In GIFT’

In 2022, a report from American short-seller Hindenburg Research sent shockwaves through the Indian stock market with bold accusations against the Adani Group. Following the report’s release, Adani's shares faced a steep decline.

Among its claims, Hindenburg alleged that companies under the Adani Group had breached Securities and Exchange Board of India (SEBI) regulations concerning minimum public shareholding, with promoter stakes allegedly surpassing the 75% limit. 

Beyond these accusations, Hindenburg also raised questions about SEBI Chairperson Madhabi Puri Buch, suggesting a potential conflict of interest tied to her past investment in an offshore fund linked to Adani. Buch denied the allegations, clarifying that her investments predate her tenure at SEBI and that all necessary disclosures were made.

According to Buch, these claims were seemingly aimed at damaging her reputation. Following these developments, SEBI issued a “show cause” notice to Hindenburg for alleged non-compliance with Indian regulations.

SEBI and PAC Review Amid Allegations

Currently, SEBI and its Chairperson Buch are under scrutiny, with the regulatory authority facing rigorous inquiries concerning stock market oversight in the wake of Hindenburg’s report. A parliamentary panel, including representatives from various political parties, was scheduled to question Buch and senior SEBI officials, pressing for her presence despite her excused absence due to personal commitments.

This committee’s mission is to evaluate SEBI’s performance, while opposition lawmakers appear focused on probing the accusations linked to Buch’s offshore investments.

SEBI’s Chair has recently faced additional criticism from the opposition party, which raised concerns about her involvement in offshore funds tied to the Adani Group. These legislators argue that such connections may breach the regulator's code of conduct.

Corporate Law Firms Advocate for SEBI Chief’s Tenure Extension

Numerous corporate law firms are urging the government to extend Madhabi Puri Buch’s tenure as SEBI’s Chair, given her proactive approach in enforcing regulatory actions. Since Buch’s appointment, SEBI has introduced Key Result Areas (KRAs) for its officials, fostering a strong work ethic with an increase in activities like issuing Show Cause Notices, investigations, and raids.

This heightened regulatory focus has meant new business opportunities for legal firms, as larger corporations find themselves facing SEBI scrutiny. Recently, for example, SEBI issued a Show Cause Notice to a corporation for allegedly favouring its interests over those of ordinary shareholders.

Gold Cadbury in GIFT City’: A New Attraction for Gold Importers

Gandhinagar’s GIFT City is drawing increased interest from gold importers, and for good reasons. First, the import duty for gold is set 1% lower than the national rate, making it an attractive import hub. Additionally, unlike other regions, gold imported into GIFT City doesn’t need to be melted and molded before being sold, allowing it to be traded immediately and saving importers processing costs.

However, this setup is sparking concerns among jewelers outside GIFT City, who feel it creates an uneven playing field.

Interestingly, banks that import gold through other ports have been hesitant to register in GIFT City, despite there being no restrictions on registration. So far, only a few select importers are taking advantage of GIFT City's favorable conditions, highlighting an opportunity for government-backed banks to consider the rising demand for unprocessed gold imports.